Compliance Webinar Feb 2012


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Are you a financial advisor wondering if and how you can get involved in social networking? This webinar addresses the compliance and regulatory environment and answers your compliance questions!

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  • The Social Web is not just a fad; it is a fundamental shift in how humans communicate, interact, collaborate, create, inform themselves, prioritize, organize, buy, sell, and play. It is your customers, your friends, your family, your employees, your constituents, your shareholders, and, like it or not, you. Social media is to the Web what electric motors were to electricity, the quantum leap in utility that took a magical new technology and transformed society.
  • Socialware
  • Compliance Webinar Feb 2012

    1. 1. Can Financial Advisors Stay Compliant When Using Social Media?
    2. 2. <ul><li>Online Advisor Central </li></ul><ul><ul><li>The Web’s comprehensive resource to help advisors like you learn and use social networking to grow and sustain their practices. </li></ul></ul><ul><li>Today’s Webinar </li></ul><ul><ul><li>Recent guidance from FINRA and the SEC as related to critical social media compliance issues facing every advisor. </li></ul></ul>
    3. 3. Kevin Condon, PhD, CFP ® <ul><li>Executive VP, Chief Compliance Office, Online Advisor Central </li></ul><ul><li>Practicing CFP ® since 1987 </li></ul><ul><li>Founder, President, Baltimore-Washington Financial Advisors 1986-2002 </li></ul>
    4. 4. Social Networking: Not a Fad. Tailor made for our Profession <ul><li>Everyone Is Using It – 800 MM on FB, 120 MM on LI, 360 MM on TW </li></ul><ul><ul><li>Consumer is in charge – what do they want and where </li></ul></ul><ul><ul><li>50% visit their FB account daily! </li></ul></ul><ul><li>A Substantial Subset Now Prefers Web to face-to-face </li></ul><ul><ul><li>FB is replacing email, </li></ul></ul><ul><ul><li>Li is replacing rollodex, </li></ul></ul><ul><ul><li>Text and Twitter are replacing the phone </li></ul></ul><ul><ul><li>If you aren’t social, you’re invisible to these people. </li></ul></ul>
    5. 6. Which are you? <ul><li>Already social </li></ul><ul><ul><li>Refine practices with regulation in mind </li></ul></ul><ul><li>Just getting started </li></ul><ul><ul><li>Understand the landscape and craft policies accordingly </li></ul></ul>
    6. 7. Susan E. Bryant <ul><li>Past President, NASSA </li></ul><ul><li>Senior Securities Regulator, State of Oklahoma, 1986-91 </li></ul><ul><li>Managing Partner, Bryant Law Group, Camden, ME </li></ul><ul><li>Attorney for MyFinancialAdvice, 1993 to present </li></ul>
    7. 8. Regulation Compliance Makes Good Business <ul><li>1. Regulation is a fact of life </li></ul><ul><ul><li>Regulators are not out to 'get' anyone </li></ul></ul><ul><ul><li>Conversely, Regulators are not concerned with the costs or inconvenience to the regulated of complying with the rules their concerns are customer protection </li></ul></ul><ul><ul><li>Conclusion either comply or face regulatory consequences </li></ul></ul><ul><li>2. Social Media </li></ul><ul><ul><li>Covered as is </li></ul></ul><ul><ul><li>None of it is oral it is written and therefore either correspondence or advertising </li></ul></ul><ul><ul><li>Texting, blogging, messaging and other interactive communications are all regulated as correspondence </li></ul></ul><ul><ul><li>Social Media Listings, some Videos, Blog Postings and other static social media are all forms of advertising. </li></ul></ul><ul><ul><li>Other Videos, Webinar presentations, training media are forms of advertising treated like seminar presentations. </li></ul></ul>
    8. 9. Compliance Requirements <ul><li>1. Procedures </li></ul><ul><ul><li>Everyone needs procedures </li></ul></ul><ul><ul><li>single person firms need basic procedures at a minimum a Code of Ethics, Business Continuity Plan, Privacy Procedures </li></ul></ul><ul><ul><li>firms with two or more individuals need supervisory procedures, even if only one individual is licensed. </li></ul></ul><ul><ul><li>large firms need extensive supervisory procedures. </li></ul></ul><ul><ul><li>Individuals working as both investment advisers and registered representatives of a broker-dealer must follow the strictest procedures of both firms. </li></ul></ul><ul><ul><li>Testimonials are only prohibited for investment advisers but would apply to all activities of a broker-dealer/investment adviser representative. </li></ul></ul><ul><ul><li>Advertisements for investment advisers under SEC Rule 206(4)-1 is any communication addressed to more than one person </li></ul></ul><ul><ul><li>Advertisements for broker-dealers under proposed new rules would be communications to more than 25 persons and would not include communications with institutional investors. </li></ul></ul><ul><ul><li>Procedures must be tailored to the nature of the Firm and the business of the representatives of the Firm. </li></ul></ul>
    9. 10. Social Media Procedures <ul><li>1. Basics </li></ul><ul><ul><li>a. All Social Media falls under existing Regulatory Requirements </li></ul></ul><ul><ul><ul><li>It is either correspondence or advertising </li></ul></ul></ul><ul><ul><ul><li>If procedures do not specifically address social media, procedures may be inconsistent or too restrictive </li></ul></ul></ul><ul><ul><li>b. Social Media Procedures should Address </li></ul></ul><ul><ul><ul><li>what is allowed; </li></ul></ul></ul><ul><ul><ul><li>how it is documented and preserved (what books and records are required and how are they kept) </li></ul></ul></ul><ul><ul><ul><li>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). </li></ul></ul></ul><ul><li>2. Current Procedures by Firms </li></ul><ul><ul><li>Some restrict or prohibit everything </li></ul></ul><ul><ul><li>some allow all static with preapproval but prohibit interactive unless it can be preserved in real time. </li></ul></ul><ul><ul><li>some allow both static and interactive, but have systems to record and review all of it. </li></ul></ul>
    10. 11. Social Media Sites <ul><li>1. Content </li></ul><ul><ul><li>Is the Content Compliant with existing rules </li></ul></ul><ul><ul><li>Applies to anything regulated business related content </li></ul></ul><ul><ul><li>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. </li></ul></ul><ul><li>2. Record Keeping </li></ul><ul><ul><li>All static content must be printed and kept as advertising. </li></ul></ul><ul><ul><li>If the firm requires pre-approval, such approval must be documented. </li></ul></ul><ul><li>3. Supervision </li></ul><ul><ul><li>For firms with supervisory systems, procedures should indicate how supervision of social media sites will be conducted and documented. </li></ul></ul>
    11. 12. Interactive Communications <ul><li>Must be preserved in the same manner as emails </li></ul><ul><li>Interactive communications are not &quot;oral&quot; they are written and must be treated as such </li></ul><ul><li>All must be conducted in a medium that allows instantaneous recording and preserving </li></ul><ul><li>All must be supervised </li></ul>
    12. 13. Testimonials <ul><li>There is a fine line between prohibited testimonials and allowed ratings or other endorsements (see the rating system at Myfinancialadvice). </li></ul><ul><li>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. </li></ul><ul><li>Take care in target marketing to avoid testimonials </li></ul><ul><li>It is NOT OK to say &quot;Mary and Jane appreciated my understanding of their non-traditional family in providing advice to them.&quot; </li></ul><ul><li>It is OK to say &quot;I provide advice that takes into consideration non-traditional family issues.&quot; </li></ul>
    13. 14. Use Case <ul><li>Be careful in using examples of clients or sample clients to avoid SEC Rule 206(4)-1 prohibition on referring to past recommendations. </li></ul>
    14. 15. Compliance Factors, Pt. 1 <ul><li>Usage Guidelines – appropriate versus inappropriate use </li></ul><ul><li>Content Standards – What you won’t allow </li></ul><ul><li>Monitoring – How it is done </li></ul><ul><li>Frequency of Monitoring – How often </li></ul>
    15. 16. Compliance Factors, Pt. 2 <ul><li>Approval of Content – How content is controlled </li></ul><ul><li>Criteria for Approving </li></ul><ul><li>Training – Overview and detail during planning, as needed. </li></ul><ul><li>Certification – This will happen fast. Is it credential-able </li></ul>
    16. 17. Compliance Factors, Pt. 3 <ul><li>Functionality – Inventory of channels to avoid trouble, reviewed </li></ul><ul><li>Personal versus Professional Sites – Understand the options. </li></ul><ul><li>Information Security – Part of archive system </li></ul><ul><li>Enterprise Wide Sites – Larger firm software and monitoring </li></ul>
    17. 18. Archiving Vendors *Barack, Lauren. Registered Rep , Feb. 2, 2012
    18. 19. Service Comparisons <ul><li>Price: $5 to $50 per person per month for archiving, after setup. </li></ul><ul><ul><li>Enterprise Solutions get cheaper seats, more upsells </li></ul></ul><ul><ul><li>Boutique Firm – theoretical minimums </li></ul></ul><ul><ul><li>FINRA vs SEC/State </li></ul></ul><ul><li>Facebook, Linkedin, Twitter </li></ul><ul><ul><li>Adding YouTube and Blogging </li></ul></ul><ul><ul><li>Can be combined with email monitoring </li></ul></ul><ul><ul><li>Serious search, monitoring, reach tracking </li></ul></ul><ul><li>New industry. Veteran firms only since 2008! </li></ul><ul><ul><li>Consolidation and Marketing partnerships underway. </li></ul></ul><ul><ul><li>Smarsh, Erado, Socialware, Sungard – mature </li></ul></ul><ul><ul><li>LinkedFA , HootSuite for FAs–New </li></ul></ul>
    19. 20. Online Advisor Central Components <ul><li>Expert Services : </li></ul><ul><li>Regulatory/Legal </li></ul><ul><li>Custom social process training </li></ul><ul><li>Video/rich media production </li></ul><ul><li>More </li></ul><ul><li>Social Tools Training : </li></ul><ul><li>Videos </li></ul><ul><li>Worksheets </li></ul><ul><li>Promotional Support : </li></ul><ul><li>Blog/Video/Post Syndication </li></ul><ul><li>Collaboration/Peer Support : </li></ul><ul><li>Forums </li></ul><ul><li>Monthly Q&A </li></ul><ul><li>Advice Delivery Platform </li></ul><ul><li>Custom advisor “portal” </li></ul><ul><li>Fully compliant </li></ul><ul><li>End-to-end eCommerce enabled </li></ul>
    20. 21. What next? <ul><li>Join Online Advisor Central Community group on LinkedIn </li></ul>
    21. 22. What next? <ul><li>Try OAC free for 14 days </li></ul><ul><li> </li></ul>