AdvisorAssist CCO Series: Social Media Compliance

Advisors are jumping into social media to communicate with clients, generate new business and even service clients. However, many chief compliance officers ("CCOs") are confused on how to proceed.

Social media is an incredibly powerful medium to efficiently build brand awareness, demonstrate knowledge and expertise among your audience, communicate with prospective clients, deepen relationships with and serve your existing clients. It can become a powerful tool in your content marketing arsenal if your firm commits to a long term, strategic approach to social media engagement.

This blog post focuses on how CCOs can properly implement social media activity within their RIA firm. For guidance on specific social sites, see our presentation, "Confident and Compliant Social Media for Advisors".

RIA Social Media Compliance In a Nutshell

Usage Guidelines
CCOs should establish usage guidelines that are communicated through a formal social media policy. This policy will define who within your firm can use social media, which sites are allowed and what your expectations are with respect to their use. Be sure to include IARs, solicitors and any third-parties that are subject to your policies and procedures.

When determining which social media sites may be used, some factors to consider include:

• The functionality of each site (and monitor upgrades and modifications to each site) and which of these functions may be modified by the user,
• the reputation of the site,
• the privacy policy of the site,
• your ability to remove third-party posts, and
• your ability to control or remove posts made by others.

Content Standards
CCOs are responsible for providing guidance on appropriate and inappropriate social media usage. One way of doing so is to establish written content standards that consider the risks that certain activities invite to your firm. These standards should specifically address the use of performance results, security recommendations or specific references to the services you provide to advisory clients.

Note: Because of the accompanying risks, most RIAs do not allow content related to security recommendations or references to specific services.

Pre-approval is not a requirement. If you elect to not pre-approve social media activity, you should be prepared to articulate your rationale for why you believe "after-the-fact" social media activity review is sufficient for your circumstances.

Third-party Content
Most CCOs allow third-parties to post content on their firm's social sites. Third-party content may include: articles, forward links or other messages.

To be somewhat more conservative, some firms limit third-party interactions to "one way postings", where IARs post on the firm's social media sites but do not interact with or respond to third-parties. Even more conservative firms will limit third-party postings to authorized users only and/or prohibit posts by the general public.

Which approach to take comes down to a business decision on your part. If your firm does allow third-party content, just be sure that you have procedures in place to monitor these posts for inappropriate content (e.g. testimonials).

Monitoring
Like all other advertising activities, CCOs are responsible for effectively monitoring communications that are available to the general public. To demonstrate this ability to monitor, we strongly encourage RIAs to use a social media archiving solution that allows the CCO to not only abide by books and records requirements (see below) but also monitor activity. These monitoring procedures should be laid out in your social media policy.

If your firm is a hybrid RIA (advisory persons are also associated with a broker-dealer) you will also have to follow the technology and process requirements set forth by the broker-dealer. Pure RIAs are left with the decision to implement monitoring and archiving software or have a process to enable the firm to effectively meet the advertising, supervision and records requirements. A smaller advisor with only intermittent postings may opt for a well-defined workflow process to review and archive social media content. A firm with more frequent activity or several posters, will likely find that the opportunity cost of their time is higher than the cost of social media surveillance and archiving tools.

Recordkeeping
CCOs are obligated to maintain records of any social media activity that may be deemed a "required record” for five years following the last year it was used. Rather than making this determination on a case by case basis, most RIAs have adopted an overarching policy of archiving all social media communications.

IARs may not alter any settings within social media sites that interfere with or preclude your firm from archiving communications. In cooperation with these policies, IARs may not destroy or alter any communications after they have been posted on a social media site (i.e. an attempt to alter archives)

Through the Regulator's Eyes

The most important thing to remember is that ALL social media is within the scope of "advertising" and subject to all aspects of the "advertising rule" that defines your responsibilities as an RIA. (Yes, this includes LinkedIn profiles.)

Social media is a very high priority for both SEC and state regulators today. While they are continuously trying to keep up with the added complexities that accompany these new tools (See: SEC National Examination Risk Alert, "Investment Adviser Use of Social Media"), it is probably fair to say that social media regulatory oversight is here to stay and will continue to evolve.

To get a sense of one state regulator's findings during a social media sweep in 2012, see this deficiency letter that was sent to a state-regulated RIA in 2012.

CCO Best Practices for Social Media Compliance

• Develop and deliver a social media policy for your firm and use an attestation form to collect information about each IAR's intended social media outlets, credentials and certification that they understand your firm's social media policies.
• Develop procedures to restrict social media usage by those that have failed to comply with policies and procedures.
• If you allow third-parties to post on your social media sites, add a disclosure that states your firm does not endorse third-party content. This will guard against anyone attributing any of this content to your RIA firm.
• Similar to your Email handling, incorporate social media components to your Books & Records capabilities to archive and retrieve historical content upon request.
• Adopt a risk-based approach to determining the appropriate frequency of monitoring.
• Document your social media monitoring activities.

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The AdvisorAssist CCO Series is a collection of blog posts that cover each of the elements of your RIA's compliance program.  Each post will provide an overview of one compliance topic, including our insights on how regulators view each topic as well as some practical steps to help Chief Compliance Officers address this topic. As always, we would welcome your comments and thoughts.

Brian Lauzon

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Guest Post from Susan Weiner, CFA: Legal Dangers for Financial Bloggers

Legal dangers for financial bloggers: Two misconceptions, three resources, one suggestion By Susan Weiner, CFA

No financial blogger wants to get in trouble with the law, become liable for financial damages, or tarnish his or her reputation. You’ve probably thought about compliance with laws governing advisors registered with the SEC, FINRA, or other regulators. But what about copyright laws?

I believe a significant number of advisor-bloggers are guilty of copyright violations when they share information written by others. I have come across several well-meaning advisors who mistakenly believed they acted within the law when they copied all or part of other people’s blog posts. In fact, they had broken the law and could have been on the hook for financial penalties.

To help you cope, I’ve written this article sharing two common misconceptions, three resources, and one suggestion to keep you on the right side of the law and make everybody happy.

Misconception #1: If you credit and link, that’s enough

Most advisors and other financial bloggers know you shouldn’t copy someone else’s work and pass it off as your own. However, I’ve seen advisors who think it’s okay to copy an entire newspaper article on their blogs as long as they name the author and publication details in addition to linking online to the original article.

This is not correct, as you’ll realize when you check out my resource section below.

Misconception #2: If you only copy XXX words, it’s okay

There is no word-count rule that protects you from charges of copyright infringement. If you use the “heart” of the work, you’re in trouble, as explained in the “Amount and Substantiality of Portion Used” section of the University of Minnesota University Libraries’ excellent web pages on copyright.

In fact, even short phrases may be protected by copyright, according to “Copyright Protection for Short Phrases” in the Copyright and Fair Use section of the Stanford University Libraries website.

How can you share content without violating copyright? Check out the resources in the next section.

Resources for “fair use” of copyrighted material

Lawyers use the term “fair use” to describe the legal use of copyrighted materials. Here are two websites and a printable checklist that will help you assess whether the amount of another author’s text that you reproduce in your blog post is acceptable. There are no short, easy guidelines that fit all situations.

1. “Understanding Fair Use” is a good overview of the issues, presented by the University of Minnesota’s University Libraries.
2. “Fair Use,” a book chapter on this topic, is available on the Stanford University Libraries website.
3. “Thinking Through Fair Use,” a printable check list from the U. of Minn. University library, will help you think through the issues for specific materials.

Suggestion to ensure “fair use”

When in doubt, ask the author for permission to reproduce the content on your blog. Don’t assume they’ll say “yes.” However, you may score points with writers who are anxious to spread their message. If the writer says, “No,” at least you know to tread carefully in how you use the author’s content.

By the way, I don’t oppose bloggers summarizing or adding their own spin to other people’s content. But please don’t violate copyright by exceeding what is considered “fair use.”

Susan Weiner, CFA, is the author of Financial Blogging: How to Write Powerful Posts That Attract Clients, which is tailored to financial planners, wealth managers, investment managers, and the marketing and communications staff that supports them. Read her blog or follow her on Twitter, Google+ or the Investment Writing Facebook page.

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Elements of an Effective Social Media Strategy

Industry reports show that social media adoption among registered investment advisors has grown steadily over the past several years. More recently, we are now starting to hear more about the lackluster results that these efforts have yielded.

My first reaction to this is always, "Building awareness and developing a brand takes time.", which is certainly true but there's more to the story.

Social media marketing (not unlike any other strategic initiative) needs to rest on top of a well-thought out strategy. Social marketing is not a magic potion--it will not make your firm an effective marketer by itself. Dabbling in social media is like waking up one day and saying, "Let's do a marketing mailer, follow up with everyone on the list and seeing if we can get some leads." The ROI on one-off efforts like this rarely looks appealing in hindsight. (I can attest to that personally!)

To truly give social media marketing a chance to yield positive results, devote some time to developing a social media strategy first. Here is a framework for you to use to get you thinking about developing your RIA firm's social media strategy. By performing this exercise first, you will add deliberateness and purpose to the time you devote to building awareness among your target audience(s) and fostering your firm's brand.

Elements of Social Media Strategy

1. Establish mutually-shared firm-level objectives. These typically come from a broader strategic planning exercise that defines your value proposition, positioning and key points of differentiation.
   
2. Establish specific goals for your social media activities. These may include: generating leads, establishing expertise, or driving traffic to your website or blog.
   
3. Identify which social media outlets are most prevalent among your intended audience. Let's face it, most of us don't have time to effectively embrace Facebook, Twitter, LinkedIn, Pinterest and a corporate blog all at the same time. Select a one or two to start and be sure that you are working towards building a brand-consistent social media presence across selected outlets.
   
4. Identify specific social media tactics and create a content calendar. Based on the social media sites that you prioritize, commit to a handful of specific activities like blogging, participating in LinkedIn discussions, posting articles or links on Facebook and Twitter. Whichever you choose, ensure that each tactic enforces your firm-level objectives and allows you to "humanize” your brand. Let your personality to shine through!
   
5. Establish a social media compliance policy. Remember that ANY social media activity is considered advertising (yes, even LinkedIn profiles.) Social media marketing is a very high priority for regulators these days. Make sure your firm has a social media policy in place and your social sites are properly archived.
   

Brian Lauzon

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Advisor Webinar: Share your love for Social Media this Valentines Day

If you love social media as much as we do, let's spend part of Valentines Day together. AdvisorAssist and ArchiveSocial we will share with you some insights into how advisors can confidently embrace these powerful tools by understanding the regulatory and strategic aspects of social media. Our webinar will cover topics like:

• The impact social media has had on advisor regulation and how to interpret the current "rules of the road"
  
• How advisors can integrate social media into their overall marketing strategy
  
• Strategies for simplifying compliance and record keeping

"Confident and Compliant Social Media for Advisors"

Thursday February 14, 2013 at 1:00-2:00 PM EST

REGISTER HERE

Brian Lauzon

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Can My RIA Ask for my Social Media Passwords?

It’s pretty amazing if you think about it.  The vast majority of compliance responsibilities for an RIA come from legislation that was written over seventy year ago.  Terms like “advertising”, “testimonial”, “newsletter” and “seminar” were pretty much left unchallenged for those seventy years.  

Then social media threw the Advisers Act of 1940 a bit of a curve ball.

“Well, what about ‘likes’ on Facebook?”

“I’m tweeting as myself, not as my advisor.”

“I have a LinkedIn profile but I don't advertise."

I give the SEC and FINRA credit for their efforts to help bridge these gaps in nomenclature and for addressing mediums that didn't exist in the pre-social media advisory industry.

So it may not surprise you to see that some crossed wires are starting to appear in the legislative world.  

Case in point:  the SEC requires that advisers monitor the social media activity of their supervised persons. This is often accomplished by simply requesting their usernames and passwords for social media sites that they will be using for business purposes.

Subsequently, several states (CA, IL, DE and MD, for example) have passed laws forbidding companies from requesting their employee's social media passwords.  There are also rumblings at the Federal level that suggest these requests violate existing privacy laws.

Lawmakers advocating personal privacy ended up placing overarching state laws that could potentially conflict with regulated RIAs.

We advise chief compliance officers to collect social media attestation forms from employees that are active with social networking. These forms typically include a request for screen names for any social media outlets that the employee plans to use for professional use.

Suggestions For Advisors:  

If you haven’t already, take steps to bifurcate your personal and professional social media networks.  After doing so, you will only have to provide credentials to those social media sites that you will be using to deliver advisory services.

Suggestions For CCOs:

We suggest that you inquire with your social media archiving vendor to understand their protocols for setting up a new advisor for monitoring and archiving.  With some vendors, the end user authorizes archiving directly with the vendor and the employer never has to see these credentials.

Social media is a fast-moving and increasing important part of our professional lives.  With a solid comprehension of the compliance aspects of social networking, both CCOs and advisors will be empowered to embrace these tools with confidence and enthusiasm.

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Webinar: Enter Into Social Media Marketing With Confidence

Webinar: Enter Into Social Media Marketing With Confidence

Date: September 21, 2012

Slides and Replay:

http://advisors4advisors.com/webinars/details/216-enter-into-social-media-marketing-with-confidence


The social media pool is open. While advisors should not be afraid to test the water, they must be prepared before diving in.
Chris Winn of AdvisorAssist will guide you through the current regulatory landscape and strategies for starting out and managing your social media presence.

At this session, you’ll learn the latest about:

• SEC, state and FINRA social media rules
• Formulating a social media strategy
• Best practices in implementing a social media policy
• Technology for efficiency
• Specific areas of interest to regulators
• Common mistakes to avoid

Speaker Chris Winn is founder and managing principal AdvisorAssist, a management consulting firm serving advisors, and he has over 19 years of experience in regulatory compliance for RIAs, reps, and B/Ds.

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What is the shelf life of your social media post?

What is your expectation for the shelf life of a social media interaction?

How long is your content relevant?

When does it go from great social content to social spam?

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Well, there are no great answers here, but thought I would share some thoughts anyway.

With so much information coming at us every day, one must be very creative to invoke discussion and dialogue. Good content will invite discussion, which should have a reasonable shelf life of a few days to maybe a month (if you are lucky).

I was checking my morning emails and reading, when once again, this same post appears. Conventional wisdom would suggest to stop following this thread after 87 comments and 5 months since the initial post.

But no, I am dead set on torturing myself to the very end here!

The post in question is through a LinkedIn Group, where a registered representative asked his peers who he might consider in shopping for a new broker-dealer.

First question you might ask? Is this how I want to inform my current firm that I am shopping around? (Rhetorical question...I do not need 87 replies please).

Second question for all 87 of you...do you think this registered rep is still listening for your advice?  You are typing into the abyss my friends!

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In short, social media needs to start with a strategy and then apply your risk. If this registered representative has not been approached by their current firm after 5 months linking this back to him, perhaps their firm might soon be making their own post?  :)

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