Do you (or any of your staff) routinely make posts or endorse posts on LinkedIn and other social media that may be cause for concern should compliance regulators get it on their radar? If so, you’ll want to read on, as we’ve compiled some interesting facts about potential compliance issues for financial firms on LinkedIn and other social media who could get into hot water if they fail to take regulatory compliance precautions.
For years, the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) have been trying to adapt their regulations to the social media world. In this article, we’d like to expand on that and discuss how you can safely participate on LinkedIn without incurring the wrath of the compliance hawks. To do this, though, you must follow a few easy, and likely familiar, rules.
If you are trying to take advantage of the power of LinkedIn to connect with potential clients, you are likely coming up with some resistance from your compliance department. Advances in social networking have happened much quicker than regulators can regulate, leaving financial advisors and compliance departments wondering what they should be doing.
Registered representatives affiliated with broker-dealers are regulated by FINRA. FINRA has taken steps to issue some guidance about how best to use social media. Different firms hand social media differently. Some firms send any information they want to post in LinkedIn to compliance for approval. While some firms fervently adhere to the letter of FINRA’s Rule 206(4) which discusses the way advisors can advertise, promote themselves, or receive testimonials.
LinkedIn endorsements and solicitations have proven to be especially problematic in this area. Investment News has a good article on this subject worthy of a read.
It is very important that you have a written social media policy. This policy should detail the types of activities that are permissible on LinkedIn and other social networks.
If you participate in LinkedIn and other social networks, we’ve provided some ideas to consider to keep the compliance department happy and develop your business.
Establish a Viable Social Media Policy
It is very important that you have a written social media policy. Your policy should detail the types of activities that are permissible on LinkedIn and other social networks. What kinds of posts are permissible? May an advisor join groups, comment, provide answers and start discussions? The policy should be clear about what is not permissible and the steps an advisor is to take in order to get questions answered. Remember, these social platforms are constantly changing, so questions will be asked often.
Your policy should discuss who advisors may connect with, the type of information that can be put into a profile and whether the advisor and/or the staff are permitted to use social networks during the workday. Many companies are creating profile templates for their advisors to use. This is an idea you should give some serious thought to implementing.
The policy should also discuss compliance review. Since compliance is already reviewing your marketing materials, website content, etc. you may wish to follow the same procedures with your LinkedIn work.
Profiles, blog posts and other activities of this more static nature will likely need to be approved in advance. Interactive activities like posts on LinkedIn and Twitter don’t have to be reviewed in advance, but must be supervised. Check with your compliance department about this. It may be difficult for the compliance department to supervise these posts in real time, so they may require advance approval.
Always remember that your activities on social networks are considered business activities – a record of which is ultimately kept somewhere. You shouldn’t do something on a social network that you wouldn’t think of doing in another setting.
Archive All Your Activity
Just like everything else you do, be sure to create an “audit trail”, and archive your work on social networks. Set up a mechanism to archive all your social media activity, including comments and posts on LinkedIn and make backup copies of your archives.
Since you understand why this is necessary, we don’t need to go into a lot of detail here. The essence of it is, you want to be able to answer questions regulators may ask and reserve the ability to go back over an advisor’s activity to confirm it is in compliance with your policy.
LinkedIn recommendations can be tricky for financial gurus. Save yourself some time and check to see what your compliance department says about LinkedIn recommendations. In many cases, they are allowed as long as your client doesn’t tell people you guaranteed results, and instead focuses on your skill set as a financial advisor. Remember, you can always edit a recommendation before posting it. Make it a policy to edit when necessary and then confirm your edits with the original writer.
Engage in Smart Practices
Certain compliance advisors have endorsed the caveat, “Think Before You Tweet!” Think before you like a Facebook post or +1 a Google+ post. Think before you re-tweet and remember, FINRA rules mention that commenting on third-party posts may be construed as an endorsement.
All the above can be summarized by telling you to use your common sense and remember that your activities on social networks are considered business activities – a record of which is ultimately kept somewhere. You shouldn’t do something on a social network that you wouldn’t think of doing in another setting. Financial advisors should be using social media to develop their credibility and obtain referrals.
The future is now. Every day you wait to adopt more FINRA-compliant social media policies you get further behind. Know that although it is possible to do pretty much whatever you want to do on social networks, just be sure to jump through all the necessary compliance hoops in advance before you do so.
We Help Financial Firms Avoid FINRA Compliance Issues on LinkedIn
With help from Outsource My IT, a leading IT services firm in New Jersey, we’ll help you remain in good standing with FINRA, SOX, and other financial compliance regulations.
Contact us today at (973) 638-2722 or firstname.lastname@example.org for more information or help with establishing better social media protocols and, specifically, LinkedIn policies to help your financial firm avoid FINRA compliance violations.