online advisor central: social media and compliance, february 2012

1Proprietary and Confidential property of Myfinancialadvice, Inc

Can Financial Advisors Stay Compliant When Using Social

Media?

2 Proprietary and Confidential Property of Myfinancialadvice, Inc

Online Advisor Central The Web’s comprehensive resource to help advisors

like you learn and use social networking to grow and sustain their practices.

Today’s Webinar Recent guidance from FINRA and the SEC as related

to critical social media compliance issues facing every advisor.


Kevin Condon, PhD, CFP®

Executive VP, Chief Compliance Office, Online Advisor Central

Practicing CFP® since 1987 Founder, President, Baltimore-

Washington Financial Advisors 1986-2002


Social Networking: Not a Fad. Tailor made for our Profession

Everyone Is Using It – 800 MM on FB, 120 MM on LI, 360 MM on TW Consumer is in charge – what do they want and where 50% visit their FB account daily!

A Substantial Subset Now Prefers Web to face-to-face FB is replacing email, Li is replacing rollodex, Text and Twitter are replacing the phone If you aren’t social, you’re invisible to these people.


Which are you?

Already social Refine practices with regulation in mind

Just getting started Understand the landscape and craft policies

accordingly


Susan E. Bryant

Past President, NASSA Senior Securities Regulator, State

of Oklahoma, 1986-91 Managing Partner, Bryant Law

Group, Camden, ME Attorney for MyFinancialAdvice,

1993 to present


Regulation Compliance Makes Good Business

1. Regulation is a fact of life Regulators are not out to 'get' anyone Conversely, Regulators are not concerned with the costs or

inconvenience to the regulated of complying with the rules their concerns are customer protection

Conclusion either comply or face regulatory consequences 2. Social Media

Covered as is None of it is oral it is written and therefore either correspondence

or advertising Texting, blogging, messaging and other interactive

communications are all regulated as correspondence Social Media Listings, some Videos, Blog Postings and other static

social media are all forms of advertising. Other Videos, Webinar presentations, training media are forms of

advertising treated like seminar presentations.


Compliance Requirements

1. Procedures Everyone needs procedures single person firms need basic procedures at a minimum a Code of Ethics,

Business Continuity Plan, Privacy Procedures firms with two or more individuals need supervisory procedures, even if

only one individual is licensed. large firms need extensive supervisory procedures. Individuals working as both investment advisers and registered

representatives of a broker-dealer must follow the strictest procedures of both firms.

Testimonials are only prohibited for investment advisers but would apply to all activities of a broker-dealer/investment adviser representative.

Advertisements for investment advisers under SEC Rule 206(4)-1 is any communication addressed to more than one person

Advertisements for broker-dealers under proposed new rules would be communications to more than 25 persons and would not include communications with institutional investors.

Procedures must be tailored to the nature of the Firm and the business of the representatives of the Firm.


Social Media Procedures

1. Basics a. All Social Media falls under existing Regulatory Requirements

It is either correspondence or advertising If procedures do not specifically address social media, procedures may be

inconsistent or too restrictive b. Social Media Procedures should Address

what is allowed; how it is documented and preserved (what books and records are required and how

are they kept) how it is supervised (active review of social sites, preapproval and post review of

copies of static postings, review of interactive communications on a random basis, Search engine searching fpr registered persons to detect unauthorized postings).

2. Current Procedures by Firms Some restrict or prohibit everything some allow all static with preapproval but prohibit interactive

unless it can be preserved in real time. some allow both static and interactive, but have systems to record

and review all of it.


Social Media Sites

1. Content Is the Content Compliant with existing rules Applies to anything regulated business related content Regulatory requirements may not apply to non-business content,

but firms may choose to regulate to avoid negative implications coarse language, inappropriate pictures, inappropriate statements all of which could be attributed to the regulated entity by association.

2. Record Keeping All static content must be printed and kept as advertising. If the firm requires pre-approval, such approval must be

documented. 3. Supervision

For firms with supervisory systems, procedures should indicate how supervision of social media sites will be conducted and documented.


Interactive Communications

Must be preserved in the same manner as emails Interactive communications are not "oral" they are

written and must be treated as such All must be conducted in a medium that allows

instantaneous recording and preserving All must be supervised


Testimonials

There is a fine line between prohibited testimonials and allowed ratings or other endorsements (see the rating system at Myfinancialadvice).

It is best to avoid gray areas to limit the cost and irritation factor of trying to convince a regulator of the difference between what is prohibited and what is allowed.

Take care in target marketing to avoid testimonials It is NOT OK to say "Mary and Jane appreciated my

understanding of their non-traditional family in providing advice to them."

It is OK to say "I provide advice that takes into consideration non-traditional family issues."


Use Case

Be careful in using examples of clients or sample clients to avoid SEC Rule 206(4)-1 prohibition on referring to past recommendations.


Compliance Factors, Pt. 1

Usage Guidelines – appropriate versus inappropriate use Content Standards – What you won’t allow Monitoring – How it is done Frequency of Monitoring – How often



Approval of Content – How content is controlled Criteria for Approving Training – Overview and detail during planning, as needed. Certification – This will happen fast. Is it credential-able



Functionality – Inventory of channels to avoid trouble, reviewed

Personal versus Professional Sites – Understand the options. Information Security – Part of archive system Enterprise Wide Sites – Larger firm software and monitoring


Archiving Vendors

*Barack, Lauren. Registered Rep, Feb. 2, 2012


Service Comparisons

Price: $5 to $50 per person per month for archiving, after setup. Enterprise Solutions get cheaper seats, more upsells Boutique Firm – theoretical minimums FINRA vs SEC/State

Facebook, Linkedin, Twitter Adding YouTube and Blogging Can be combined with email monitoring Serious search, monitoring, reach tracking

New industry. Veteran firms only since 2008! Consolidation and Marketing partnerships underway. Smarsh, Erado, Socialware, Sungard – mature LinkedFA , HootSuite for FAs–New

Online Advisor Central Components

Expert Services:•Regulatory/Legal•Custom social process training•Video/rich media production•More

Social Tools Training:•Videos•Worksheets

Promotional Support:•Blog/Video/Post Syndication

Collaboration/Peer Support:•Forums•Monthly Q&A

Advice Delivery Platform•Custom advisor “portal”•Fully compliant•End-to-end eCommerce enabled


What next?

Join Online Advisor Central Community group on LinkedIn


What next?

Try OAC free for 14 dayswww.onlineadvisorcentral.com

online advisor central: social media and compliance, february 2012

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