• Massachusetts scrutinizes advisers and social media

    Last week the Securities Division of The Office of the Secretary of the Commonwealth released a new survey on social media use by investment advisers doing business within the Commonwealth. The goal was to determine the scope of use and most importantly assess the steps taken to ensure compliance. Not surprisingly use among advisers is high and compliance controls are sorely lacking.

    Here are some of the key findings on advisers use of social media:

    • 44% of investment advisers use some form of social media and this number is trending up for next year.
    • 41% of advisers age 42-51 and 31% of advisers 52-61 use at least one form of social media. This group represents the largest use across the survey population.
    • LinkedIn is the most popular social network used at 41%, Facebook is second at 14% and Twitter is third at 8%

    When it comes to social media compliance, firms and their advisers are clearly putting themselves at risk for fines, suspension and possible lawsuits. Take a look at these key findings from the survey:

    • 69% of firms using social media stated that they have no written record retention policies for social media content.
    • 57% of firms using social media stated that they do not retain all content posted on social media websites.
    • 68% of firms using social media stated that they don’t have written policies and procedures governing the use of social media by employees.
    • 52% of firms using social media stated that the firm does not monitor or review social media content produced by its employees for business-related purposes.

    In the words of the Securities Division, “the Survey suggest that investment advisers using social media sites for business communication may not have implemented sufficient recordkeeping systems and/or supervisory and compliance procedures.” This is clearly an understatement of the situation they discovered. Firms should consider this an early warning to the increased level of scrutiny coming down at the state level.

    These results come on the heals of FINRA’s latest announcement that they are going to offer additional guidance on social media use by Registered Reps. This Notice, an extension to what was provided in Notice 10-06, is aimed at clarifying key questions arising from the industry.

    As we’ve said before, the social media train has left the station. Advisers are going to use these platforms to grow their business (regardless of corporate policy) and the clock is ticking for firms to embrace this movement and ensure compliance. FINRA has already started their examinations on social media and you can expect states like Massachusetts to follow suit very quickly.

    Category: Compliance, Financial Advisors, FINRA/SEC, News | Tags: , , , , , , .

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