Firms still playing catch-up on social media

By Helen Kearney

NEW YORK (BestGrowthStock) – U.S. regulators have set guidelines to allow brokers to use Facebook and Twitter to find new business, but firms continue to block employees from the popular social media websites,

Advisers are eager to network with clients through such user-driven websites, yet big brokerage firms are still restricting access because of concerns about record-keeping requirements and the need to monitor sites not on their own servers.

That may change soon as brokerages implement system changes that will let them capture and archive online communications to meet regulatory requirements.

“Most clients use (social media sites) as part of their lives, and advisers want to be there,” said Doug Siegel, head of compliance at UBS Wealth Management Americas (UBSN.VX: )(UBS.N: ). “We’re in the communications business, and we need to get there.”

The Financial Industry Regulatory Authority released guidelines in January in response to questions from their member firms about dealing with the new world of social media.

Under the guidelines, information on social networking sites is considered “sales literature.” Therefore, firms must retain all profiles, posts and tweets for at least three years.

A firm’s compliance department must approve all “static” information, which includes profiles and blog entries, before an employee posts it online. On the other hand, interactive communications, such as status updates and comments on a discussion board, are exempt from this requirement.

FINRA advised compliance departments to review a selection of these posts to ensure they are within the guidelines, but this can be done after they go online.

“It’s very positive that FINRA made that distinction,” said Chad Bockius, head of marketing at Socialware, a social media software company. “The value of a site like Twitter is the real-time nature of tweets or status updates.”

It gets complicated, though.

Firms do not have to approve posts by clients or other third parties, but that changes if an adviser “favorites” the tweet, re-posts someone else’s tweet or says he or she “likes” a post on Facebook. Bockius recommends that firms switch off these features.

Likewise, the social network Linked In lets users recommend other members to their contacts. This could violate the U.S. Securities and Exchange Commission’s rule against using recommendations or testimonials in advertisements.

Morgan Stanley Smith Barney (MS.N: ) is starting a pilot program that allows a group of advisers to access Linked In with their work email addresses, said Craig Pfeiffer, head of marketing and client experience.

Raymond James (RJF.N: ) expects to allow advisers to start using social media over the next three months, said Associate Compliance Director Jason Thackeray.

UBS is still looking at the issue, Siegel said.

Both UBS and Raymond James let advisers have limited Linked In profiles, without any interactive features.

So while dealing with regulatory demands on one hand, brokerages also feel pressure from customers who want all the interactive features of favorite online retailers or social media.

“Clients are not comparing our sites to the sites of other firms,” Pfeiffer said. “They don’t distinguish how we are regulated versus other sites.”

(Reporting by Helen Kearney; Editing by Lisa Von Ahn)

Firms still playing catch-up on social media