Last month in New York, I was invited to speak with a group of broker-dealer compliance staff at an event about email and social media compliance. More specifically, and to be technically correct, we call this “supervision of electronic communications” and you can read all about it in FINRA Rule 3110(b)(4). There, I had the opportunity to speak with Forbes contributor, Joanna Belbey. Before the event, we had a good discussion on the FINRA 2016 examination priorities and more specifically, how they relate to email and social media compliance. You can read the interview by clicking here: Mitch Atkins Forbes. See the follow-up piece to this (Don’t ‘Set it and Forget it’) by clicking here: Mitch Atkins Forbes Part II.
Email and Social Media Compliance Decrypted
After having worked in regulation for nearly 20 years, working as a consultant to broker-dealers and investment advisers has been truly enlightening, particularly in understanding the perspective of the chief compliance officer. I have had the opportunity to help design, audit and improve systems of supervision for electronic communications. What has become evident in my recent work with consulting clients is that FINRA has been very active in its email and social media compliance reviews. Today, more than ever, the term electronic communications includes far more than email. In the past, firms could be relatively confident if they had a decent email compliance system and banned the use of social media. But today, if talented advisors are not permitted to use popular communication channels, they may work elsewhere – read: competitors.
For these reasons more employers are ensuring that they have top-notch supervisory controls in place to allow the use of communication channels advisors want. To that end, firms wanting to beef up compliance might consider the following:
- procedures – development of clear policies and procedures covering communications;
- technology – implementation of a cutting edge email and social media compliance platform (but be careful and remember that simply buying the system isn’t enough – FINRA recently published an AWC in which a Chief Compliance Officer was suspended for failing to implement such a system – see FINRA Case 2014039194102 – Feb. 23, 2016);
- personnel – ensuring that persons tasked with conducting email and social media compliance reviews are adequately trained and that adequate resources are devoted to conducting reviews;
- controls – requiring annual compliance questionnaires in which advisors certify their compliance with policy and disclose all communication channels they use;
- testing – some firms are hiring summer interns to search advisor names against social media sites (and who is better at social media?).
And finally, your keyword flagging database is the key (no pun intended) to the effectiveness of your supervisory system. Make sure that the database is reviewed frequently, that it is dynamic and evolves with both the business of the firm and the changing times. See my LinkedIn article about that for more details.
Mitch Atkins is Founder and Principal of FirstMark Regulatory Solutions, a broker-dealer and investment advisor compliance consulting practice in Boca Raton, Florida. Contact Mitch at 561-948-6511.