Archive for category eDiscovery
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
Today’s post comes from Norv Leong, Director of Product Marketing at Actiance.
Ahh, another LegalTech in the history books. As usual, there was an interesting mix of suits, vendors, and swag-hunters trolling the floors of the Hilton. One difference from last year was the very noticeable feeling that in-house counsel, law firms, and compliance officers alike – across all industries – acknowledging (sometimes reluctantly) that they have to include social media and social-ish communications (think IMs, collaboration, texts, etc.) in their legal hold and eDiscovery strategies.
For instance, over the last twelve months, the body of case law involving social media eDiscovery has mushroomed exponentially. Everywhere you turn you see a wide variety of cases – personal injury, harassment, copyright infringement, wrongful death, even assault and rape – where social media content played a critical role in the outcome.
More and more, judges are allowing the admissibility of instant messages, Facebook posts, and Tweets. Judging by the conversations we had at our booth, there was also much concern over what to do with data such as Jive, SharePoint, and Chatter. These tools are like Facebooks for the enterprise, which researchers, engineers, and partners use to exchange information, product plans, and other business records.
Our presentation on the first day, “Social Business is booming: Are you really prepared for eDiscovery?”, generated heaps of questions, such as “Can you inspect files for sensitive keywords?”, “How do you speed up eDiscovery searches?”, and “Do you capture content in context?” Given the number of folks that stuck around after my presentation to ask me questions, I felt pretty optimistic that the market was indeed ripe for solutions that could help organizations manage this array of communications channels while slashing their legal costs and reducing their overall risk exposure.
It could be that attorneys are a nervous, worrying lot, but still, it’s no coincidence that patent litigation continues to skyrocket, eDiscovery sanctions are on the rise, and law firms still continue to do big business. I’m sure I’ll be back next year to see if the same folks I saw this year look a bit grayer up top.