Ever since social media first came into our lives with the emergence of platforms like MySpace in the early 2000s, it has shown no signs of slowing down. Today, over 30% of the world’s population utilizes some type of online community. In the U.S, that number amounts to 73%. Facebook itself has more active users than China’s entire population of 1.40 billion! While social media offers the benefits of extended reach, flexibility and freedom as a means of communication, financial services firms can find themselves at serious risk if they fail to archive social media content like other business communications.
Organizations across industries have jumped on the opportunity to use social media as a tool for branding, customer service, and sales - with a projection that digital sales could account for more than 40% of new inflow revenue within the next 5 years. One industry experiencing particularly high returns on the investment in social media is the financial services industry, with year-to-year growth averaging 31%. In a recent survey, 79% of Financial Advisors said they had successfully acquired new clients through social media.
While social media offers the benefits of extended reach, flexibility and freedom as a means of communication, financial services firms can find themselves at serious risk if they fail to treat social media like other business communications, equally subject to regulatory laws by FINRA, SEC and FDA, including but not limited to:
Rule 17a-3 and Rule 17-a4
In a recent regulatory notice concerning blogs and social networking sites, FINRA stated that firms must retain records of all business-related electronic communications to remain compliant with Rule 17a-3 and Rule 17a-4 under the Securities Exchange Act of 1934 and NASD.
Rule 17a-4(b)
The SEC issued a rule that requires firms to keep records for business communications made via social media, even if only distributed internally. It also stated that broker-dealers must preserve records for a period of not less than three years, with the first two in an easily accessible place.
Rule 4511
This law requires organizations to preserve records under FINRA and SEA rules, in a format that complies with SEA rule 17-a. It also requires record preservation for 6 years
Regulatory Notice 10-6 and 1139
These laws focus on issues relating to FINRA members’ use of social media, including record-keeping, supervision and responding to third-party posts and links.
Failure to comply with these regulations can result in hefty fines, bad publicity, and ultimately loss of business. In April 2015, WealthForge, LLC was fined $20,000 for failure to use an adequate supervisory system that captured, reviewed and retained social media communications used by its representatives.
Later in the year, Scottrade Inc was fined an astonishing $2.6 million for failing to implement a supervisory system or retain securities-related electronic records in the required format stated by the rules.
While there are a few options for collecting the required records for compliance, social media archiving is the most relevant technology solution that automatically monitors specified social media feeds and archives all activity associated with that feed. It also provides authentication, so that the record can be verified. Financial Services firms are in dire need of social media archiving technology; and as new rules continue to come into play in the future, they simply cannot afford a delay.
PageFreezer is a leader in the online archiving industry. We’ve been developing our state-of-the-art cloud-based system since 2010, helping over 1750 clients including financial firms, multinationals, and government agencies meet their compliance requirements. We know the rules inside and out, and have the technology and systems for easy, simple, affordable social media compliance.
Learn more on how to comply with FINRA, SEC and FCA regulations.
