There’s been a lot of chatter recently over Dodd-Frank, the act that was passed to promote more financial stability following the crisis of 2008-09. Designed to improve accountability and transparency in the financial system, it’s ushered in sweeping changes to financial regulation, unseen since the days of the Great Depression. So you know it must be a big deal if it’s keeping lobbyists and lawyers busy in the nation’s capital.
What’s it all about?
Under Dodd-Frank, the Securities and Exchange Commission (SEC) must create rules to establish a fiduciary duty for broker dealers and provide disclosures of material conflicts by broker dealers and registered investment advisors. If that statement is adopted, each broker dealer would be required to provide potential customers with a written statement, prior to working with them. The broker disclosure statement would require that the written statement given to customers outline such information as: description of the types of accounts and services that the broker dealer provides, any areas of potential conflicts with such services, disclosure of all financial and other incentives, and the limitations on the duties a firm owes to its customers.
Translation? Broker dealers must be completely forthcoming and open when they’re prospecting for new business or new customers. And they have to be very clear from the outset what kinds of services they can offer, any potential conflicts of interest, and other such items. This puts a tighter leash on broker dealers and you can bet that the regulatory agencies will be keeping a close eye on the content to ensure that relevant parties meet requirements on full disclosure. The US government is taking steps to avoid a repeat of what happened a couple years ago.
If you need to monitor the communications of broker dealers or investment advisors, then it’s now possible to monitor and archive instant messages, content posted to social networks, as well as BlackBerry SMS and PIN content. As there are so many ways for broker dealers to communicate these days, it’s not just about email anymore. That’s so 1990s. Now, you’ve got Facebook, Twitter, Skype, OCS, Sametime, SMS, to name just a few.
In fact, there are around 330,000 sales folks on LinkedIn who work in the financial services sector in the US. That’s a lot of people for regulators to monitor. Making sure broker dealers stay in line with the Dodd-Frank regulations is becoming ever more challenging, but at least now, firms can now leverage technology options to ensure that real-time communications are your friend – and not foe.