Financial services firms, advisers and brokers can get themselves caught in their own tracks on social media, worrying excessively about Securities and Exchange Commission rules on disclosures, marketing and communication, as well as Financial Industry Regulatory Authority guidelines.

In truth, the guidance out there is “pretty flexible,” says Rajib Chanda, a partner with the Boston-based Ropes & Gray regulatory law firm, at the Investment Company Institute’s Mutual Funds and Investment Management Conference.

“There’s a lot of room to maneuver,” he says.

The guidance is largely principles-based and not prescriptive – and the most important prescription that is always in effect, he said, is … keep good records of the communications that your company and its employees are making over these interactive, multi-layered media for distributing information and ideas.

Here is a succinct list of practical tips for getting seriously involved in social media and not running afoul of the law in the process. Experts weighing in included Chanda, FINRA vice president Thomas A. Pappas, Fidelity Investments associate general counsel Alexander C. Gavis, data storage consultant Mark Diamond, and U.S. Global Investors president Susan B. McGee.

Keep records. This “somewhat takes a village” of record-keepers, Gavis contends. Make sure you have the right experts in your organization involved, from the social media savvy to the regulatory maven to the advertising guru.

Decide the level at which to get engaged. Firm level only? Firm and rep? Firm, rep and all employees?

Analyze the costs – and benefits. Why get involved, if your brand and your business won’t gain from it?

Pre-determine how to deal with ‘third-party posts.’ Give your reps and staff templated responses, when outsiders seek to get engaged. Set out how to re-direct questions. Instruct on how to “adoption and entanglement,’’ as Pappas puts it. That’s where your advocate adopts terms or points in an outside post and gets entangled in back-and-forth discussion.

Avoid artificiality. Instruct your staff not to pump up activity by, say, picking up the phone and asking friends or colleagues to respond to a post (that might not even have gone up yet).

Enforce separation of personal business and business business. Make it clear that if an employee works in business comment or communication on his or her personal sites, that both the company and the person could be pulled into court if a boundary is crossed.

Train, train, train. If a rep or an employee doesn’t know where the bounds are, you’re in trouble.

Establish who owns an account. If your employee opens an account, but uses it to post about the business – and is encouraged to do so – who owns that account?

Make sure your employees know they’re being recorded. Not by you. But by the Internet. If it’s discoverable, by anyone, friend or fore, you’re both liable.

Cordon off company data. Put a “data envelope’’ on the iPad that only you can update and whose content can’t be moved onto the Net.

Tell service providers not to delete data. Go directly to Facebook and Twitter, for instance, and tell them not to delete any records from any company or employee accounts, Chanda said. It’s your record, not theirs.

Make sure you can retrieve the records, not just retain them. With social media tracking technology, “you may be able to suck it into a record-keeping system, but what happens when you try to pull it out?,’’ asks Gavis. Can you make a coherent, defensible presentation of what is being talked about? Email is sequential. Social media has many levels of conversations, with disjointed connections, across time and even across sites.

Then there is Pappas’ five-point prescription, if you want to successfully pass the scrutiny of one of its examiners.

An examiner of the regulator of brokers and advisers will look for:

1. Are there written supervisory procedures?

2. Is there evidence of supervision?

3. Is there a record of training?

4. Is there a system for sending out red alerts?

5. How did you respond? 

The nature of media may change. But one thing is constant, says Pappas: The firm has the responsibility to oversee its business communications.

Tom Steinert-Threlkeld writes for Securities Technology Monitor, a SourceMedia publication.


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