Social media isn't just for kids anymore. It has become mainstream and we receive more questions about it from our advisers each year. However, in a highly regulated industry such as financial services, it is critical that we maintain strict compliance procedures.
CUSO Financial Services LP addressed this issue very cautiously. But realistically and optimistically as well, following guidelines established by FINRA.
In January 2010, FINRA released Regulatory Notice 10-06 to provide guidance on the supervision of social media networking and blogging sites. FINRA also established a social media task force to evaluate compliance requirements for this channel of communications, actively reviewing and conducting Web searches for social media content related to registrants of broker-dealers during routine audits and targeted sweeps. Social media sites that are commonly reviewed include: LinkedIn, Facebook, Twitter and YouTube.
Social networking activity may fall under the categories of advertising, correspondence, or public appearances that may require broker-dealer supervisory oversight depending upon how content is to be used. Some social media sites such as LinkedIn contain both static and interactive components in which different regulations may apply. Therefore, we have put together written supervisory procedures for the review of all correspondence including written and electronic communications that might fall under these or other FINRA rules. Generally speaking, prior approval must be acquired from compliance before publishing content online, just like with traditional print or broadcast advertising, if the site and communication contain specific references to the broker-dealer, investment services, securities registration and/or investment products, services or workshops.
Our policies allow for the use of certain social media when prior CFS approval has been received. For example, if an adviser wishes to post a press release about an upcoming workshop on retirement planning, he or she drafts the release and has it approved through the normal process. Once approved, the release can be distributed electronically in multiple ways, such as over the wire services, on the credit union's website or posted on LinkedIn. A tweet linking to the release may even appear on Twitter, providing it identifies only the headline and a tiny URL that directs readers to the full, approved release. The methods by which the release will be distributed should be identified prior to the approval being received.
In addition, we have developed website banner ads that our credit union investment programs may use to promote investment workshops as well as a compliance-approved financial management center planning tool, which is easily accessible from the financial institution's website. The FMC allows people to use a simple online questionnaire to assess their own financial situation relative to various life stage goals and it enables credit unions to create awareness of investment programs. While this might not be strictly social media, it serves the same purpose. It provides an interactive and educational method that helps prospective clients see for themselves, on their own 24/7 timeline, where their financial well-being stands.
Blogging, on the other hand, can be problematic. Our guidelines are clear: blogs are considered advertising and as such, must be approved in advance. Much like e-newsletters and brochures these can be used as one-way educational vehicles, but comments sections are not allowed. A credit union could adapt already approved investment newsletter content for a blog, but will then be timely? Does this meet the style standards that blogs have? Blog-type Web pages are approved on an exception basis, and for most advisers, this would be too time-consuming of a promotional method anyway. Online videos require full review and approval in advance as well.
We find that Facebook and MySpace are typically used for personal networking. If no reference is made to CFS or investments, then usually there is no need for compliance review. However, if the page is developed by a financial institution that has contracted with CFS and is used to recruit for advisers, promote investment seminars or disclose the availability of investments at branches, then pre-approval must be obtained.
Any discussion of digital media would be incomplete without addressing the trend toward electronic access to investment services. This provides wonderful opportunities. Members are increasingly comfortable with online banking, so adding investment asset visibility is important. At CFS, we introduced an integrated technology solution for credit unions that allows members to view their full portfolio and its history through single sign-on with online banking. The technology allows us to quickly adapt our compliance process to effectively meet future requirements of any new or revised regulations.
Valorie Seyfert is president/CEO of CUSO Financial Services LP.
She can be reached at 858-530-4400
or [email protected]
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