Social Media Marketing brings unique challenges to financial firms and Registered Investment Advisors. Both FINRA and the SEC have set out guidelines and suggestions. This is part one of a brief overview with practical suggestions you can use.
Record keeping: The use of social media on personal devices presents a challenge from a record-keeping perspective. Given the volume of records that can be created, firms should consider using third-party software or developing internal software to maintain records. They may want to set clear policy on whether to maintain records of deleted posts (for instance, third party posts).
Antifraud Provisions: Antifraud provisions should be familiar since they are the same as applied to any other type of firm communication, including traditional forms of advertising. Advertisements may not contain any untrue statements of material fact or be otherwise false or misleading. Marketing materials may not violate this provision. Firms should also consider whether certain types of communications such as customer service-related responses are “advertising” and if different standards of review might apply. Global firms will also want to consider the reach of social media communications outside the United States.
Suitability: In Light of the public nature of social media, firms may want to prohibit all social media communications that recommend a specific investment product. Recommendations may not be suitable for every potential member of the audience. Keep this in mind when deciding whether to permit Q&A social media sites. Also, use caution when providing advice using direct messaging and make sure to include a suitable disclaimer.
Pre-approval of postings: Currently, pre-approval of postings is only required for broker-dealers when they share “static” content. The SEC suggests that firms consider requiring all posts to be pre-approved. Practices differ as to whether “status Updates” constitute static content or real-time communications.
Supervision of Social Media Use: Whatever procedures are adopted, the firm must properly supervise social media interactions to ensure that such communications do not violate FINRA or SEC rules, respectively. As a general matter, supervision policies should also consider supervision with respect to other securities laws such as insider trading, private placement exemptions, etc.
Authorized Personnel: Employees should be trained on social media communications before they are authorized to use it for business purposes. Encourage periodic certification of the employees’ compliance. Training for global firms will also want to consider the reach of social media communications outside the United States.
For more detailed information, check out:
FINRA: http://www.finra.org/industry/issues/advertising/p006118
SEC: http://www.sec.gov/about/offices/ocie/riskalert-socialmedia.pdf
Part two of this discussion will be continued in a later post.