In an effort to distract myself from the heartbreaking impact of Hurricane Sandy across the New York and New Jersey area, I thought I’d do a bit of research on how regulators of the retail banking industry are handling social media.
As a former FINRA employee and an avid attendee of compliance conferences and events, I’m familiar with guidance from FINRA and the SEC for the securities industry. However, retail banking is governed by a whole other alphabet soup of federal authorities. Regulators include the Board of Governors of the Federal Reserve System (FRB), the Federal Deposit Insurance Corporation (FDIC), the National Credit Union Administration (NCUA), the Office of the Comptroller of the Currency (OCC), and the Consumer Financial Protection Bureau (CFPB).
However, like the securities industry, banks are interested in using social media to provide a personal touch to their customers. Even the Office of the Comptroller of the Currency recently ceased paper distribution of news and issuances in favor of email, Facebook and Twitter.
In response to the retail banking industry’s request, the Federal Financial Institutions Examinations Council (FFIEC) is coordinating the activities of these multiple federal banking regulators to craft social media guidance. FFIEC plans on publishing these guidelines in the Federal Register before the year’s end. If you are not familiar with the FFIEC, the Council was established in 1979 to promote uniformity in the supervision of financial institutions.
A source at the Office of the Comptroller of the Currency (OCC), says that once guidance is published in the Federal Register, the FFIEC expects substantial feedback from the industry and will accept comments for sixty days. From what I hear, the guidance will describe how existing rules and regulations impact social media. And as the members of FFIEC recognize the rapidly shifting nature of social media, they are trying to avoid specific recommendations. Their intent is to offer principal-based guidance that may be useful over time. Guidance may include, but, not be limited to interpretations of rules regarding Deposit Accounts, Consumer Lending, Payment Systems, Truth in Savings, Disclosures and more.
Don’t want to wait until possibly Spring of 2013 to get started? Those who wish to proceed with social media now, may want to begin to interpret how existing rules may impact the use of social media at retail banks. For example:
- individuals need to be verified as customers for advice to be provided
- liking or retweeting certain articles may be seen as “providing investment advice” and subject to review
- marketers to comply with advertising guidelines to avoid misleading or inaccurate communications
- disclosures need to be considered
- records of electronic communications require retention
- and privacy, confidentiality and customers’ data needs to be protected.
Additionally, there are also wider regulatory concerns such as Gramm-Leach-Bliley Act (GLBA) , Red Flag Rules and Privacy of Consumer Financial Information to work through.
While you wait for Federal Financial Institutions Examinations Council (FFIEC)’s guidance, you might also find it helpful to read what regulators within the securities industry are saying. We’ve found that guidance from regulators (FINRA, SEC, IIROC, FSA, SEBI) tends to fall along similar lines: social media is considered as just another form electronic communications and should be treated as such.
FINRA Regulatory Notices:
- 10-06 – Social Media Websites Guidance on Blogs and Social Networking Web Sites
- 11-39 – Social Media Websites and the Use of Personal Devices for Business Communications
- 12-29 – Communications with the Public
- FINRA’s Guide for the Web for Registered Representatives
Securities and Exchange Commission-
Although this seems like a lot to wade though, you’ll see it’s worth the effort. Financial institutions that deploy social media are reaping the rewards of enhanced customer service at lower costs, broader brand recognition and an increase in new accounts and revenues.
On a personal note, as compliance in retail banking is a new area for me, I particularly welcome your insights. I would also welcome suggestions for additional resources for me to read or conference or webinars to attend. And finally, here at Actiance, we’ll be drafting a White Paper on regulations for the Retail Banking Industry. Look for that soon.