The risky business of social media compliance

As social media quickly rises above the fray as an effective marketing vehicle for RIAs, the risks of compliance have also become greater. Using social media sites such as LinkedIn, Twitter and Facebook to share articles via hyperlinks is nearly ubiquitous today. But RIAs must be careful doing so, given the liability that a hyperlink represents.
Many financial services companies haven’t been monitoring these third-party links because they don’t have the capability. And of those that are monitoring links, some are physically printing and filing the content of each and every link to try to adhere to compliance regulations — a laborious process that is dangerous to a business.
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“Link compliance is a huge issue today so financial firms must have procedures in place to adhere to the most stringent Broker Dealer rules,” said John Male, director of financial planning at G&G Planning Concepts Inc., an independent financial planning firm. “A person might be tweeting 10 to 15 times per day, and the process of printing links would not only be terribly erroneous, it would be a full time job in itself.”
TIGHTER REGULATIONS
Due to regulations established by the Securities and Exchange Commission and the Financial Industry Regulatory Authority, broker dealers and RIAs are responsible for making sure that there is no false or misleading information on the links they provide.
In the eyes of Finra and the SEC, you are tacitly endorsing any articles or links you share. If the content from that link isn’t captured at the time that it is shared, then it could be taken down, changed, or the content deemed inappropriate by Finra. There is liability if you are not reviewing and saving the content that a hyperlink represents.
“Finra gave the RIA community time to adapt to new rules of the road,” said Mr. Male. “But now that social media has become omnipresent, Finra has become better at clarifying the rules, making it much easier for RIAs to comply. Because of this, Finra will be more aggressive and take a harder stance with people who do not comply in the future.”
This brave new world, as we know it, now demands the digital capture of all electronic communication system data (using indelible media for storage, no less). SEC rules require companies to have documented retention policies. They also ask companies to store data properly and index all records so they are readily accessible. Furthermore, offsite electronic file storage needs to be in strict compliance with D3P (third-party independent download providers).
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Regulatory compliance for data retention, indexing and accessibility for firms that traffic in trading or brokering financial securities including stocks, bonds and futures, burdensome as it is, is now reaching deep into social media. And that means D3P plays an ever more crucial role in assuring total compliance, especially now that financial firms are required to capture embedded hyperlink addresses, as outlined by the Finra Regulatory Notice 11-39, to monitor social media sites for hyperlinks to third-party sites for any false or misleading content. And enforcement is well underway.
EMBEDDED HYPERLINK CAPTURE
Thankfully, compliance solutions are now available to address this issue. New “embedded link capture” services are available to address Finra and SEC regulations requiring the capture of third-party links. With an embedded link capture solution, financial services firms remain compliant while giving financial advisers the confidence to use social media for business growth.
Embedded hyperlink capture services enable financial services the ability to capture third-party links, including multiple links in a single post, across all social media channels (e.g., Twitter, Facebook, and LinkedIn, etc.). These services also archive the content of third-party links originated in social media posts, along with an image of the hyperlink location and text including any documents, pictures or video that is represented by the URL or hyperlink.
Once the content of the linked webpage is captured, the image and text can be monitored and reported based on the firm’s defined compliance policy. Firms can access and view all hyperlink webpages, enabling them to reliably and efficiently survey linked webpages and flag potential issues.
Social media has quickly become an incredibly valuable tool for RIAs. Every year, more and more people are signing up to use social sites like Twitter, LinkedIn and Facebook, and users are becoming more and more active.
The use of Twitter at G&G Planning Concepts has made it easier than ever for the firm’s social media expert to communicate with clients and attract new clients.
“Having an embedded link capture service in place is a critical first step for us in ensuring our compliance with Finra and SEC regulations,” Mr. Male concluded.
Before diving into social media, RIAs should ask their technology providers about automated embedded link capture solutions. It’s a must-have.
Craig Brauff is CEO of Erado.