Firms giving up the ghost on blocking social media, survey finds

Shift now on to implement compliance policies; 'more of an acceptance'

Jul 12, 2013 @ 7:09 am

By Mark Schoeff Jr.

It appears that Investment advisory firms are increasingly targeting their compliance efforts on the use of social media -- an indication that efforts to ban the use of such programs have failed.

A study released on Thursday shows that 83% of firms have adopted written social media polices, up from 80% last year.

The most recent figure is a dramatic increase from what the survey found just a few years back. Indeed, in 2010, only 43% of the respondents had rolled out written policies for social media usage.

The growing influence of social networking on the advice industry showed up in other results as well. The number of firms prohibiting the use of social media -- such as Facebook, Twitter and LinkedIn – has declined to 49% this year. That's down from 54% in 2012. Over the past year, social media testing has increased for 43% of the firms surveyed.

The results are based on an online poll of 462 compliance professionals working for investment advisers registered with the Securities and Exchange Commission. The Investment Management Compliance Testing Survey was conducted by the Investment Adviser Association, the ACA Compliance Group and Old Mutual Asset Management.

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Another noteworthy result from the survey: Respondents said they had upped the amount of compliance testing for advertising and marketing, social media, personal trading, disaster recovery and political contributions over the last year. In addition, they cited advertising and marketing, valuation and custody as “hot compliance topics.” Each of the three has been the subject of SEC actions or risk alerts over the past few months.

Fully a third of the firms surveyed spent more than $500,000 on compliance in 2012. They are going high tech as well, with 60% using electronic compliance systems.

The survey suggests that firms are giving up the battle to keep social media out of their shops. Instead, they're loosening strict bans and allowing more use with appropriate policies and procedures in place, according to Laura Grossman, IAA assistant general counsel. “They're shifting to more of an acceptance that there's a need to integrate social media into their business models,” Ms. Grossman said.

Another reason that advisers have turned their attention to social media is because the SEC has, too. “There's an awareness in the investment adviser community that the SEC is focusing more on this area during exams,” Ms. Grossman said.


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