Technology Update

Social-media seminar offers lessons for firms

Jun 24, 2012 @ 12:01 am

By Davis Janowski

Collegial ribbing, good-natured consternation and gentle exasperation.

Those were some of the responses I noted last week during exchanges between regulators and the regulated at the social-media seminar hosted by the Securities Industry and Financial Markets Association at its annual Tech Leaders Forum in New York.

Put together by the organization's Technology Management Committee, the daylong meeting's first panel discussion brought together a mix of regulatory officials and representative experts from big firms such as Bank of America Merrill Lynch and Fidelity Investments.

Whether they spoke gently or with some bite, what audience members told the regulators they want is more specific guidance.

The regulators, for their part, retorted that they can't regulate every new feature on every new social-media channel and technology that is invented.

In their view, the best approach continues to be — when at all possible — making the new channels conform to the old paradigms of advertising and communications regulations already in force.

Throughout the day, Financial Industry Regulatory Auth-ority Inc. Notices 11-39 (issued last year) and 10-06 (from 2010, the first notice specifically mentioning social media) were cited along with the record-keeping requirements found in Securities and Exchange Commission Rule 17a-4.

The single best piece of advice for all types of firms, first voiced by Julie Riewe, deputy chief with the asset management unit of the Securities and Exchange Commission, but repeated throughout the day: Draft a set of social-media policies and procedures around social media, put them in place, follow them and train, train, train your staff on them.

I thought that Douglas Preston, head of regulatory affairs for global banking and markets at Merrill Lynch, put it most elegantly and succinctly when he said of surveillance and supervision requirements related to social media: “Handle it as you would any risk.”


So look at your policies and procedures, and apply reasonable practices; if it has a hint of being imprudent, don't do it.

The word “reasonable” came up a lot among regulators when discussing how they would inter- pret advisory or firm behavior, firms and even various third-party compliance vendors and attorneys.

Do what seems reasonable when it comes to applying new features and allowing advisers to use them, or not.

Another big topic of discussion revolved around issues of retention.

Many firms continue to try to retain everything. That approach is likely to be forced to the wayside, for two reasons: The increasing pace of new features being introduced at existent networks and the ever-growing number of new networks, and second, the issue of retrieval.

Many firms, especially large ones that often find themselves in litigation of various types, try to keep all their communications easily available in their original format for 30 days after being archived.

No matter how much storage is available, the need for it is growing exponentially.

Also problematic, though, is that after those 30 days, content tends to be converted to a write-once-read-many format (far better known as WORM).

Using that format, it is difficult to search for the data and re-animate it to something closely resembling its original format. It is one thing to bring back textual items, such as e-mails or instant messages, but it is another to reassemble a project or presentation that involves a variety of multimedia content.

Consider an apt illustration of just how futile it would be to attempt to address each new wrinkle in social media, anyway.

Quite a few valuable minutes of that first session on regulatory issues specifically discussed the “like” button on Facebook.

Various hypothetical situations were raised and discussions ensued.

Later that day, Facebook said that it will integrate its “like” button far beyond the tidy confines of Facebook proper. It will be available in third-party applications, which will in turn be able to push a user's “like” activity to Facebook's newsfeed.

Some of Facebook's partners, including social-media networks Foursquare and Instagram, have already implemented the feature.

As Mr. Preston said: “The worst a compliance officer can have to say is: "We have to block this site until we can address this [new feature] and address the risk.'”

* * *

The Financial Planning Association is putting new impetus behind its free online PlannerSearch service (, which assists consumers in locating qualified financial planners in their area based on city, state or ZIP code.

Last week, the FPA said that it had added features and improvements to the application, which contains information on more than 6,000 members, all of whom have the certified financial planner designation.


Included in the latest update is the ability for consumers to search for planners based on how the advisers charge, whether they offer free initial consultations and by areas of specialization.

Those 45 specialization areas are found within four categories (major life changes, personal finances, investments and business finances).

The thorny issue of how advisers charge is covered by including the choices of “combination/fee,” “fee only,” “commission only” or “salary.”

These are just the latest recent improvements to PlannerSearch.

I reported last month on my blog about a partnership between the FPA and Oltis Software LLC.

Through that agreement, consumer users of the latter's slick retirement app (available for Android devices, iPads and iPhones) now can touch a button in the app and be connected to the PlannerSearch database from their mobile device.

Visit the online version of this column for links to that post and a separate review of the app (RetireLogix) , including screen shots.

I will also provide links to a separate post full of how-to advice from the “Deep Dive” conference sessions on each of the big three social-media networks (Facebook, LinkedIn and Twitter).

or on Twitter @ddjanowski


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