SEC Recommended Compliance Considerations for Financial Services Firms

The SEC Office of Compliance Inspections and Examinations recently released a “National Examination Risk Alert” titled Investment Adviser Use of Social Media(January 4, 2012).

In the report, the SEC recognizes the “rapidly accelerating” use of Social Media within the Financial Services Industry and offers “observations” to users based on SEC Staff reviews of current practices within the Industry.

Following is a summary of the “non-exhaustive list of factors” that the SEC Staff felt that “an investment adviser may want to consider when evaluating the effectiveness of his/her firm's compliance program”.

Guidelines for Usage: Does your compliance policy address specific social networking sites that are “approved” for usage?

Criteria for Approving Site Usage: What criteria does your firm use to determine appropriate sites to use? Considerations may include: site reputation, privacy policy, the ability to remove or control posts from other people (third party posts), and the advertising policy of the site.

Content Standards: Does your policy clearly outline Standards for acceptable (or prohibited) Social Media Content? (i.e. Content that contains investment recommendations is prohibited).

Monitoring: How is your firm’s social media use being monitored? Is it effective?

Frequency of Monitoring: How frequently is your firm’s social media content being monitored? Due to the potential virility of social media content “The after-the fact review  of violative content days after it was posted on a firm’s social networking site, depending on the circumstances, may not be reasonable.”

Approved Content: Consider the appropriateness of pre-approval requirements.

Firm Resources: Has your firm dedicated sufficient resources to adequately monitor and maintain social media compliance?

Training: Has your firm implemented an appropriate training program to “promote compliance and to prevent potential violations of the federal securities laws and the firms internal policies?”

Certification: Does your firm require certification for individuals using social media. Certification can help confirm an adviser’s knowledge and understanding of applicable federal securities laws and firm policies in regards to Social Media.

Personal/Professional Social Media Usage: Does your firm’s policy outline the difference between Personal and Professional use of Social Media sites? What is the policy in regards to personal social media use? What content is permissible on a personal social media account?

Information Security Risks: Does your social media policy pose an information security risk? “Firms may consider adopting compliance policies and procedures to create appropriate firewalls between sensitive customer information, as well as the firm’s own proprietary information, and any social media site” that advisors are permitted to use.

 Thanks for visiting our blog. As always, questions and comments are welcomed and appreciated.

Click here to sign up for our “Accidental Marketer” Newsletter.

If you found this article interesting, you may also want to read:

5 Reasons Financial Planning Firms Should be Using Social Media

Static vs Interactive Content - Compliance Guide

FINR Clarifies Complance Rules for Financial Advisor's - Notice 11-39

LinkedIn Compliance - Part 1

LinkedIn Compliance - Part 2

Facebook Compliance - Part 1

Facebook Compliance - Part 2

Facebook Compliance - Part 3