Social Media and Compliance Specialist - Actiance
This Thursday’s Thought Leader Actiance (#TLTActiance) guest blog is by Elizabeth Lumley, special projects editor at financial services newswire Finextra, based in London. Follow her on Twitter @LizLum
According to research from the Boston Consulting Group, revenues from global transaction banking are expected to grow from $189 billion in 2011 to $509 billion in 2021 – an increase of 170%.
This renewed focus on the transaction bank has brought up several key trends. To highlight these I’m going to look at two trends from Finextra’s Global Banking Transaction Survey.
Most banks are combining cash management, payments, trade finance (and sometimes securities services) into one business unit.
Almost 90% of the banks surveyed in 2012 have created a transaction banking group, combining these business, or plan to in the near future. That number has grown exponentially. In 2010, 57% of those surveyed had merged, or were planning to merge, their trade finance and cash management business. That rose to 77% in 2011.
Now, there are a few issues I have with these statistics. And it’s from a technical, rather than a business strategy standpoint.
The client-facing sides of the bank are now concerned with this idea of ‘customer-centricity’. Banks need a ‘customer view’ of their services, not a product-view of their services. Why?
So that banks can enable a stronger strategic focus on customer service, channel and product innovation. So that banks can ‘cross-sell’ their services. It is not a giant leap to suggest to a cash management client, that ‘oh by the way…we also offer supply chain.’
However, saying that a bank is now ‘customer-focused’ rather than product-focused, is very different from re-engineering decade’s old, legacy-heavy, enterprise-wide infrastructure that has been aligned along product lines.
Piecing together your old ‘product’ systems with some dodgy middleware, sticky tape and chewing gum, or moving your cash management guys to the same floor of the building as your trade finance gals – does not mean you are now operating in a serene, holistic, IT paradise (complete with angels and cotton candy.)
In 2013, most banks ‘want’ to combine their business under the neatly packaged ‘transaction banking’ umbrella – because of all the reasons cited including ‘better press’. (I mean who will admit, to the media, that their business is struggling to cope with changes in customer behaviour; with ageing systems that were probably built when people thought having a phone in your car was the height of innovation?)
But many banks are still struggling with real issues concerning complexity their IT environments. In fact 57 per cent of respondents, to the survey, said IT and system complexity is a hindrance. Any business within the bank, can offer cool, smart, innovative products – but if the infrastructure supporting them is, for lack of a better word…creaky, then the whole house of cards will fall apart.
Mobile channel development is a growing trend, with 45 per cent of banks ranking this a priority in the coming year, while 63 per cent said expanding self-service channels such as mobile would be part of their strategy over the next three years.
Conservative IT people – and let’s face it most bank IT people aren’t your young guns in hipster jeans and retro glasses (not that I’m saying that’s a bad thing) – tend to deal with innovation in terms of ‘products’. The digital revolution that has been going on around us, in the consumer world, is often seen in banking as a mobile revolution.
The questions that are being asked in innovation and development teams right now are:
- How do you get payments on the phone?
- How do you engineer a ‘Wallet’ on the phone?
- How do you allow a corporate treasurer to authorise a payment on the phone?
This is the ‘mobile as a channel’ view of the world – which has led many banks to make the mistake of trying to shove the online banking experience into the mobile. (Or to shove the card onto the phone via NFC)
You should not think of mobile as a channel, but think of it as the channel. Whether you’re a retail customer or a corporate customer – you’re not looking for banking services ‘on a mobile’ you are looking for ‘mobile banking services.’ There’s a difference.
The cell phone, tablet or smart phone is merely the device of today.
According to last year’s Capgemini World Payments Report only two percent of mobile phone users have ever made a payment using their phone. Customers are not crying out for more apps – where they are moving towards is being able to access banking and payments services wherever they are.
It is people who are mobile. If your innovation strategy is bogged down with the device – it will move in the wrong direction.
That revolution in consumer banking is having an immediate impact on what corporate customers are demanding from their banks and how banks plan on focusing their investment in innovation.
Elizabeth Lumley is a global specialist commentator on services, regulations, risk, data and technology in investment, retail, and global transactional banking. She is an internationally recognised reporter, tweeter, blogger and broadcast journalist. Elizabeth Lumley is currently special projects editor at financial services newswire Finextra, based in London, where she is responsible for all the multi-media output.
Today’s blog is from Joanna Belbey, Social Media and Compliance Specialist at Actiance.
This month, the Division of Investment Management of the Securities and Exchange Commission issued the first in a series of “IM Guidance Updates” to clarify its positions on emerging legal issues. The first topic was social media.
Financial services firms are cautious by nature, and its both our experience and no surprise, that firms are taking a very conservative approach and are filing a huge amount of social media content with FINRA. The SEC is calling out that this may be unnecessary in a number of cases.
First some background. To ensure that communications from financial institutions are suitable, fair and balanced, the FINRA Advertising Regulation Department reviews the content of more than 100,000 communications every year. Some communications are submitted as required by FINRA rules, others are submitted voluntarily. Some are filed in advance, others within 10 days of publication. However in FINRA Rule 2210(c)(7)(M), effective February 2013, retail communications posted on an “online interactive electronic forum that is contained on a social media website” are specifically excluded from these filing requirements.
However, as firms have other filing requirements aside from FINRA, such as Section 24(b) of the Investment Company Act of 1940 (“1940 Act”) or Rule 497 under the Securities Act of 1933 (“1933 Act”), SEC has seen fit to provide guidance on what should and should not be filed.
As the SEC states “Whether a communication need be filed depends on the content, context, and presentation of the particular communication”. So nothing changes there. This is simply reiteration. But now the SEC goes a little further. The more specific, the more likely it needs to be filed. And as an aside, whether the communications are filed or not, they still need to captured, supervised, archived, made e-discoverable like any other written communication for “business as such”.
The SEC provided some examples for clarity:
Do Not File
- Simple mention of a specific investment company or family of funds without discussion of merits
- Mention of word “performance” in connection with a specific investment company or family of funds without mention of returns
- Factual introductory statement / hyperlink to fund prospectus (ie, report available here)
- An introductory statement not related to investment merits of a fund that includes hyperlink to general information
- Response to an inquiry via social media that provides factual information and does not include merits of the fund
File (to meet requirements of Section 24(b) or Rule 482):
- Discussion of fund performance that provides specific mention of fund’s returns
- Issuer communications that discuss merits of an investment fund
The regulators continue to reinforce what we know to be best practices of social media. Pitching financial products, and discussing specific performance and returns is unwelcome on social media and may require pre-approval by a registered principal of the firm as well as filing requirements.
A better approach?
Provide compelling content, not sales pitches. Offer information that is informative, entertaining, and worth sharing. In a compliance-constrained industry like financial services, delivering compelling content can be challenging, but it’s by no means impossible.
The first step is to inventory your existing content to see what can be leveraged for social media. Start with pre-approved content that has been reviewed by the company’s compliance team for both corporate governance and regulatory compliance. Use this content to develop a library of interesting insights on investment strategies, wealth management, saving for college or retirement, and similar topics. These articles can provide a foundation for social media newcomers who are looking to start building their online networks.
This Spring is a great time to get started!
Other information you may find helpful:
Belbey Blogs: New FINRA Communications Rule 2210
Division of Investment Management of the Securities and Exchange Commission Issues Guidance Update on Social Media Filings by Investment Companies
IM Guidance Update March 2013
FINRA Rule 2210
Regulatory Notice 12-29 Communications with the Public
Regulatory Notice 10-06, Social Media Web Sites: Guidance on Blogs and Social Networking Web Sites (January 2010)
Guide to the Web for Registered Representatives
FINRA: RCA – March 1999 – Ask the Analust – Electronic Communications
Todays’ post is from Joanna Belbey, Social Media and Compliance Specialist, Actiance. @Belbey
We all know that the continued success of any business depends on its reputation. That’s the primary purpose of all our advertising, marketing and public relations campaigns. But what happens when something goes wrong? All that hard work can vanish with one poorly handled crisis.
That’s why most larger firms have Crisis Communications Plans that describe the processes to follow for a number of scenarios. Some of the smarter firms have even created plans just for social media. They recognize that at some point, you can pretty much guarantee that your firm will attract some very public, very unwelcome negative attention. And that social media will just amplify it. In fact, as firms are discovering, social media can actually create the crisis.
Once the plans are approved, most firms cross their fingers and secretly hope that it never happens to them.
However, at a recent Business Development Institute event, I discovered that a few firms actually test their preparedness by conducting “war games”. I was curious how that would work, so after the event, I spoke with the media relations and social media team at a large financial services firm to learn how they did it.
They relayed that when their sales teams began to use social media, they became acutely aware of both the benefit and risk for the organization. So they enlisted their Public Relations Firm of Record to help them test both their traditional and social media crisis communications plans in real time.
- Respond appropriately to a crisis in real time, which would involve identifying an issue, making the decision to respond, crafting the response in the right tone, gaining approval of the response, and delivering the response publically across numerous outlets in a timely manner.
- Proactively communicate with various audiences that include: customers, employees, agents, news media, local community, company management, directors and investors, trade associations, government elected officials, regulators and other authorities and suppliers.
- Find the right balance between thoughtfulness and urgency.
- Consciously create anxiety to make the test as real and memorable as possible.
- Pick topic in advance.
- Simulation to be cross functional: identify and gather all key stakeholders such as legal, risk, compliance, public relations, marketing, customer service, corporate communications, investor relations, human relations, subject matter experts, senior execs, IT and Security.
- Inform senior management in advance.
- Guarantee no leaks. Create a safe, secure environment by conducting the test off site in controlled environment. In this case, no email was used, all communications among the team were paper-based. Personal electronics were not allowed in the war room during event.
- Test the plans over time. Every 1.5 hours represented a day, as an acute crisis can extend over several days.
- Monitor activities across traditional and social media.
- Respond in real time across multiple outlets to the crisis.
- Social media both creates traditional media and adds a level of urgency / responsiveness. Responding to thousands (or hundreds of thousands) of comments across social media is very different that handling incoming phone calls from traditional media.
- Having access to pre-identified subject matter experts with well defined approval processes, allows the ability to craft realistic responses quickly.
- Combining two crisis communications plans (traditional and social media) insures accountability.
And as planned, the test was stressful and memorable. “We’re glad it’s over!” said the participants of the war games for this financial services firm.
But they take comfort in being prepared for an upcoming crisis.
Is your firm ready?
On February 4, 2013, as result of the systematic harmonization of NASD, NYSE and FINRA rules, FINRA Communications with the Rule 2210, went into effect. I wanted to learn more, so I attended the SIFMA Compliance and Legal Society, New FINRA Communications Seminar last week. It was an educational panel that include Kevin Zambrowicz (SIFMA), John Lajiness (Fidelity), Tom Pappas (FINRA), Holly Smith (Sutherland Asbill & Brennam) and Edward Sullivan (UBS).
The panel discussed that FINRA Rule 2210 brings some significant changes to the communications rule and that firms were expected to update their Written Supervisory Procedures accordingly. However, the rule was announced back in June, so firms have had plenty of time to get ready.
In fact, as Edward Sullivan, Head of Field Compliance at UBS, told the audience, his firm took the new rule as an opportunity to take a fresh look at the communications policies at his firm and make enhancements where appropriate.
So, how does FINRA Rule 2210 impact social media?
First some background. Back when FINRA issued Regulatory Notices 10-06 and 11-39, there were six major categories of communications under the existing NASD Rule 2210.The former six categories (advertisements, sales literature, correspondence, institutional sales material, independently prepared reprints, and public appearances) have now been replaced by three: Correspondence, Retail Communications, and Institutional Communications.
Let’s take a look at the two that impact social media:
Correspondence includes any type of written (including electronic) communication that is distributed or made available to 25 or fewer retail investors within any 30 calendar-day period. Like email, these communications do not require pre-approval, but, firms need to capture, retain and make business communications e-discoverable as well as demonstrate that they are supervising communications to meet suitability requirements. An example from social media might include an InMail on LinkedIn, a Message on Facebook, or a Direct Message on Twitter.
Retail communication includes any written (including electronic) communication that is distributed or made available to more than 25 retail investors within any 30 calendar-day period. A “Retail investor” includes any person other than an institutional investor, regardless of whether the person has an account with the firm. Communications that formerly qualified as advertisements and sales literature generally now fall under the definition of “retail communication.” These communications require pre-approval from a principal of the firm, plus all the record keeping and suitability rules apply. However, the rules specifically exempted pre-review any retail communication that:
- is posted on an online interactive electronic forum
- does not make any financial or investment recommendation or otherwise promote a product or service of the firm.
FINRA recognizes that due to the real time nature of social media, pre-review would inhibit interactive communications. Examples from social media include posts such as LinkedIn Updates, Facebook Status Updates, and Tweets on Twitter.
But, what about static portions of social media like profiles and links to content? Tom Pappas, Thomas A. Pappas, Vice President & Director, Advertising Regulation, FINRA, reiterated that the new rule codified existing guidance from 10-06 and 11-39 and that static portions of social media would still require pre-review unless they are exempted as above. In other words, if static content promotes a product or service, it requires pre-approval.
So, will this significantly change processes around social media? Probably not. As I mentioned in my blog, Belbey Blogs: What Are Other Firms Doing?, we have found that firms tend to pilot social media with pre-approval of all initial posts (such as tweets) and keep tight controls in place. Registered persons typically don’t have much latitude. However, once they begin to trust technology to safeguard their firms’ reputation and stay compliant, firms often begin to allow their reps to personalize content to varying degrees.
It just takes time. And some successes to accelerate the process.
For more information, see:
No matter what anyone tells you, you are never prepared for the Taj Mahal. We’ve all seen pictures of it of course. And we’ve heard the romantic story of how Mughal emperor Shah Jahan was so grief-stricken at the death of his third wife, he spent 22 years building a monument to her memory. But, what’s it like to visit?
First of all, it’s crowded. Lots of hustle-bustle getting tickets and walking through various lines and checkpoints, then suddenly, you are amidst a sea of people all crowded into a dark hallway.
Look up and there it is!
Then, everyone takes turns taking the classic “Couple Standing in Front of the Taj Mahal” shot.
Then a walk along a reflecting pond with stunning details.
Then taking off our shoes. Then lines.
And more lines.
And more lines.
White marble everywhere. It’s breathtaking of course, with stunning architectural details.
We’ve all seen those too.
But the part that no one ever tells you, is that everyone is so happy!
The Taj Mahal is more than a monument, it’s a living celebration.
In Shah Jahan’s words:
Should guilty seek asylum here,
Like one pardoned, he becomes free from sin.
Should a sinner make his way to this mansion,
All his past sins are to be washed away.
The sight of this mansion creates sorrowing sighs;
And the sun and the moon shed tears from their eyes.
In this world this edifice has been made;
To display thereby the creator’s glory.