A YOUNGER generation of U.S. investment advisors is pushing employers and industry regulators to allow them to use social networking websites like Facebook and Twitter to communicate with customers and prospects — and new compliance technologies may soon open the floodgates for them to do so.
FINRA Chairman and CEO Rick Ketchum
Speaking at the Securities Industry and Financial Markets Association Annual Meeting in New York yesterday, which was covered by Reuters, Rick Ketchum, Chairman and CEO of the Financial Industry Regulatory Authority (FINRA) said that while most securities firms currently prohibit their employees from using social media for compliance reasons, “new technologies … may soon enable firms to archive employee communications in order to comply with supervision and recordkeeping requirements.”
FINRA is the largest independent regulator for all securities firms doing business in the United States. It oversees nearly 4,800 brokerage firms, about 172,000 branch offices and approximately 646,000 registered securities representatives.
In his speech, Ketchum said: “Many registered representatives, particularly younger ones, want to use social networking sites to communicate with friends and potential customers. As currently constructed, these sites would not permit you to easily supervise these communications. For that reason, most firms prohibit their employees from using these sites for their business. Nevertheless, interest in these sites will not go unabated.”
FINRA has formed a Social Networking Task Force to explore “how regulation can embrace technological advancements in ways that improve the flow of information between firms and their customers—without compromising investor protection,” said Ketchum.
IROs may soon be playing catch-up with their audience
From an investor relations perspective, his remarks are interesting because many in the IR profession are reluctant to use social media channels until there is more evidence that investors are using them.
But it’s clear from FINRA’s experiences that there is strong demand among securities industry professionals to use social media, and that compliance with the archiving requirements has been the major barrier to adoption.
However, with technology solutions on the way that will remove compliance barriers for brokerage staff, many IR departments may soon find themselves scrambling to catch up with their primary audiences of industry professionals.
Of course, those that have already taken the plunge on Facebook and Twitter stand to reap the first rewards as legions of financial professionals flock to be their “friends.”
IRWebReport.com was founded by Dominic Jones in February 2001 to promote best practices for online investor relations communications. In July 2010, the site had more monthly visitors than IR Magazine and IR Alert combined, according to Compete. We would like to thank our readers for their continued support and interest.
A great question, Dominic. It’s a bit of “chicken and egg” I suspect. The early research that is coming out showing that the Street is not using SM for due dilligence/tracking is not surprising as there really isn’t much of anything out there worth their while.
Dominic, thanks for this coverage, which we find encouraging.
We aggregate the tweets of the 275 or so U.S.-based financial advisors using Twitter for business purposes on AdvisorTweets.com. Even a cursory review of the site’s Twitter stream shows that the advisors, almost exclusively independents, are mindful of the limits of what they can say. We believe the early efforts of this hardy group demonstrate the value to be added to clients and prospects of being able to see the advisors’ daily influences and their interpretations of events. More communication and more transparency has to be additive.
Your readers also might be interested that FINRA has scheduled a Compliance Considerations for Social Networking Sites Webinar on Dec. 16.
http://www.finra.org/Industry/Education/OnlineLearning/Webinars/P119385
Great article, Dominic. I can always count on your blog for smart and relevant content. I’ve been working in social media for some time and previously worked in Investor Relations so it’s fascinating for me to see the two worlds collide.
Good article – I think FINRA has to look at the fact that even if a company wants to block these sites – they really cant stop their employees from using them. (hello Iphone) Whatever answer they come up with has to deal with the fact that you can not block all financial industry employee’s from using these services – and realize that some of them already are.