A YOUNGER generation of U.S. investment advisors is pushing employers and industry regulators to allow them to use social networking websites like Facebook and Twitter to communicate with customers and prospects — and new compliance technologies may soon open the floodgates for them to do so.
Speaking at the Securities Industry and Financial Markets Association Annual Meeting in New York yesterday, which was covered by Reuters, Rick Ketchum, Chairman and CEO of the Financial Industry Regulatory Authority (FINRA) said that while most securities firms currently prohibit their employees from using social media for compliance reasons, “new technologies … may soon enable firms to archive employee communications in order to comply with supervision and recordkeeping requirements.”
FINRA is the largest independent regulator for all securities firms doing business in the United States. It oversees nearly 4,800 brokerage firms, about 172,000 branch offices and approximately 646,000 registered securities representatives.
In his speech, Ketchum said: “Many registered representatives, particularly younger ones, want to use social networking sites to communicate with friends and potential customers. As currently constructed, these sites would not permit you to easily supervise these communications. For that reason, most firms prohibit their employees from using these sites for their business. Nevertheless, interest in these sites will not go unabated.”
FINRA has formed a Social Networking Task Force to explore “how regulation can embrace technological advancements in ways that improve the flow of information between firms and their customers—without compromising investor protection,” said Ketchum.
IROs may soon be playing catch-up with their audience
From an investor relations perspective, his remarks are interesting because many in the IR profession are reluctant to use social media channels until there is more evidence that investors are using them.
But it’s clear from FINRA’s experiences that there is strong demand among securities industry professionals to use social media, and that compliance with the archiving requirements has been the major barrier to adoption.
However, with technology solutions on the way that will remove compliance barriers for brokerage staff, many IR departments may soon find themselves scrambling to catch up with their primary audiences of industry professionals.