Finra May Liberalize Social Media Policy Guidelines
The Financial Industry Regulatory Authority is working on updated guidelines that could relax certain books-and-records requirements for brokers who use social media for general branding and educational purposes, a senior executive said Thursday.
“We are well on the way to drafting new guidelines…to address” the ways that advisors use sites such as Twitter, LinkedIn and Facebook to communicate with clients and prospects, Thomas Pappas, Finra’s vice president for advertising regulation said at a social media and digital market seminar in New York sponsored by the Securities Industry and Financial Marketing Association.
He said there is no timeline for completing what would be the third iteration of guidelines to help firms avoid marketing violations in the rapidly changing world of online messaging and video-streaming. (See and .)
With input from brokerage firms, the industry-financed regulatory is trying to determine if such anodyne branding messages as “our firm is sponsoring a Veteran’s Day Marathon” can be exempted from the supervisory vetting and storage requirements that apply to business communications, he said.
It also is weighing the feasibility of a tiered disclosure system, where the level and prominence of conflict-of-interest declarations would be keyed to the intent of an advisor or a firm’s social message. It would be aimed in part at reducing the overwhelming amount of documenation dumping that is often ignored by investors, Pappas said.
Brokerage executives at the conference and some advisors who say current vetting processes are cumbersome and expensive welcomed the announcement.
In a separate discussion, some advisers discussed the tension between using social media to send clients and prospects spontaneous, rapid and clear information and the layers of compliance rules that interfere with such spontaneity.
“My job is to be in front of people and to be communicating with clients and prospects as much as i can,” said Mark Kaschenbach, a New York-based broker at Wells Fargo Advisors who said many of people prefer social media communication to phone calls or in-person meetings.
Kaschenbach, who focuses on clients who are West Point graduates, was forced into a three-month social-messaging “blackout” when he joined Wells in February after ten years at Morgan Stanley in order to be certified under Wells’ policies, a period in which his Twitter following “dropped significantly,” he said.
Since clients are much more responsive to social media postings on topical issues such as Seattle Seahawk quarterback Russell Wilson’s impending fatherhood or the Brangelina split than to dry commentary on financial planning or markets—Kaschenbach alluded to college planning and pre-nuptial agreements in his Wilson and Brangelina tweets—he suffered through the quiet period.
Firms’ social media capabilities even influenced Kaschenbach’s due diligence as he was shopping for a new employer, he said. “A major consideration was knowing what the social media platform was, or what would be available to me,” he said, adding that a growing number of advisors now inquire about their ability to use Twitter or Facebook with the same urgency that they ask about the broker workstation a firm provides.
“Certain firms are a little ahead of the curve,” he said, noting that he toyed with joining Ameriprise Financial because of its unusually liberal policy about posting videos on Facebook. Morgan Stanley for several years limited advisers to using only Facebook but now also permits preapproved Twitter messages with the firm’s name attached.
Cognizant of advertising proscriptions, most firms do not permit advisors to use Twitter professionally, although a growing number now sponsor corporate Twitter feeds.
Jamie Cox, a Richmond, Va.-based adviser affiliated with LPL Financial, also praised the power of social media, noting that brokers are much better at managing client relations than managing portfolios. However, he warned that sharing too much personal information with clients and prospects over social media could come back to haunt advisors who open themselves and perhaps family members to harrassment should investments or markets sour.
Kaschenbach, who did not discuss Wells Fargo’s social media policies, said on the sidelines of the conference that he has learned to be discreet. For example, he limited his social media outreach on days when former Wells Chief Executive John Stumpf was being publicly grilled in congressional hearings.