Technology Update

Social-media archiving, compliance solutions in focus

Advisers aren't getting guidance from regulators, and they are nervous

Apr 3, 2011 @ 12:01 am

By Davis D. Janowski

Financial advisers and broker-dealers apparently aren't sitting on the sidelines waiting for Finra and the SEC to figure out how the financial advisory industry should use social networking.

To that point, Erado Message Control Solutions, a firm that specializes in social-media archiving and compliance solutions, has seen a substantial increase in the number of inquiries about its product line.

Erado, which has worked in the e-mail and messaging compliance business across a variety of industries, has set its sights on the independent- broker-dealer and advisory space.

“You just cannot control all the access points there are to the Internet,” said Craig Brauff, the firm's chief executive. “Advisers are walking around with computers 15 times more powerful than the desktop PC they had just a few years ago, and now that computer is in their pocket.”

Add to that the fact that people are using iPad tablets and Internet-connected televisions with embedded Facebook applications, among many other devices, and you have a compliance officer's worst nightmare: not being able to defend the firm's e-mail archiving during that next SEC audit.

Meanwhile, the Financial Industry Regulatory Authority Inc. and the Securities and Exchange Commission have increased their efforts to make sure that advisers aren't misusing social-media tools, but they aren't actually saying what constitutes the appropriate use of the new media.

In fact, Finra spokeswoman Nancy Condon said that it likely will be another six months before the agency releases new guidelines.

So the question remains: How can financial services firms adopt appropriate social-networking policies when Finra and the SEC haven't established clear guidelines?

This has left many broker-dealers to pioneer their own trail.

Independent broker-dealer Commonwealth Financial Network, for example, has been beta-testing the Erado system.

Michael Sundberg, director of information security at Commonwealth, said that his team had evaluated several competitors but that Erado most suited their needs.

“Basically, we needed to allow our advisers to use social media as a business tool but at the same time must maintain our responsibility to review and capture that traffic,” he said.

Many tools that compete with Erado rely on web-browser plug-ins, and keeping track of all those devices and the various computers used by advisers can be problematic, Mr. Sundberg said.

Additionally, he said, he is concerned about systems' capturing unwanted information.

“Let's say that the adviser's kids get on [the adviser's computer] at night. We only want to capture that adviser's activity,” Mr. Sundberg said.

The Erado system is account-specific, and that allows Commonwealth, for example, to collect an adviser's social-networking traffic whenever he or she logs in, no matter the device or location.


Although there are several other vendors that do similar tracking and archiving, Erado has taken a different approach by collecting social-media traffic at the source.

It does this by using the application programming interface provided by the major social-media applications, including Facebook, LinkedIn and Twitter.

At Commonwealth, for example, that means passing along such traffic to its surveillance tool in the form of an e-mail and eventually into the virtual hands of the broker-dealer's compliance surveillance review team.

It doesn't matter whether that firm needs it in the form of e-mail, XML, text or SQL.

Being able to take advantage of an established archiving system is very important to a broker-dealer's bottom line, according to Mr. Brauff.

Erado's social-media archiving product is sold on a per-service license, meaning that there is a fee for each social-media site. It is $8 per social-media site per adviser per month, but that is on a sliding scale with both volume and multiyear-contract discounts.

Broker-dealers or advisory firms are charged only for the services used.

There are now many providers, and at least a half-dozen similar partnerships between archiving and/or compliance vendors.

An approach similar to that taken by Erado can be found in a partnership between Arkovi developer BMRW & Associates Inc. and MessageWatcher LLC (just to make the picture more difficult to untangle, MailBanc a subsidiary of the well-know compliance and consulting firm Market Counsel LLC is a reseller of MessageWatcher that is dedicated to the financial services space including broker-dealers and RIA firms).

Actiance Inc.'s Socialite product is another system that advisory firms might want to review. It is available either as a software-as-a-service deployment or as an on-premises module within Actiance's Unified Security Gateway product.

Socialite is marketed as a comprehensive solution for both moderating and archiving social networks. A software-as-a-service subscription to Socialite starts at $12 per user per month for 100 users, while an on-premise installation starts at $5,000 for 100 users.

Still another system to look at is Socialware Inc.'s Risk Manager and Social Marketer products.

In a nutshell, these are more complex and more expensive, and act as an overlay and proxy for social-media sites. A broker-dealer's advisers register through its own network to connect with the services, which allows in-depth control of features, including pre-approval of content.

For more information visit Erado online.

Related stories:

Use of social media in focus SEC begins sweep, Finra mulls issuing new guidance for advisers

Social Media: Reps, advisers experiment despite compliance concerns (webcast transcript)

Social media archiving meets e-mail archiving in new partnership

FaceTime launches security app for social networks

Small surveys reveal different points of view on advisers and social networking

Making the most of social networking

Advisers approach Google's Buzz with caution

Socialware could bring B-Ds, large RIA firms into the modern world

Arkovi, hope for advisers who want to tweet – but not delete

New networking site for advisers said to comply with Finra regs

LinkedFA responds


Dexrex on social media

Investors using social media to glean investment advice, study shows

E-mail Davis D. Janowski at


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