Posts Tagged compliance
To say I have a deep relationship with Australia would be an understatement. I lived there in the 80s where I started my career in radio, TV and film. It’s where I met my wife, she was in charge of handing out the paychecks at a radio station where we both worked, (a very important person for a free-lancer to know), and our son was born in Royal North Shore hospital. It was all happening in Sydney in the 80s. What wasn’t happening in Sydney in the 80s was coffee.
In those days the typical cup of coffee involved boiling water and mixing it with a teaspoon of crystallized gunk from a jar. Instant bad karma and a complete affront to a caffeine-addled Yank accustom to finely brewed Columbia bean. If you went to a restaurant you could get an espresso. Try drinking espresso like Americans swill brewed coffee and you will test the limits of your nervous system like never before.
So you can imagine my delight when I returned down under in 2008 to discover coffee shops everywhere. Australia had become a café society! You couldn’t walk across the street without tripping over sidewalk-seated patrons happily sipping long blacks, short whites, lattes or cappuccinos. I wasn’t the only one who was delighted in this discovery. Both Starbucks and Gloria Jean were dead-set on cracking the coffee swilling Aussie market.
One failed, one flourished. The reason one failed and the other succeed is similar to why some companies fail to successfully leverage social media for their employees. They fail to be relevant and authenticate. Here’s where I’m going with this.
In 2008 Starbucks closed 600 coffee shops in Australia, while Gloria Jean continued to open more. The reason Starbucks failed is that they were irrelevant to the Aussie coffee culture. The Aussie coffee drinker doesn’t like brewed coffee, likes his sausage rolls and Lamingtons, and isn’t in interested in spiced pumpkin lattes in the fall and peppermint chai teas in December. To the Aussie, visiting a Starbucks wasn’t an authentic experience, it wasn’t true blue. On the other hand, Gloria Jean ‘aussie-fied’ by serving espresso based coffee drinks, Aussie tucker and provided an authentic, ‘fair dinkum’ experience.
When you’re crafting a social media plan for your company, you have to think in similar terms when creating content guidelines for your users. Start with these questions:
- What does my audience what to hear?
- How can I let my users have an authentic voice?
- What is taboo in regards to compliance?
Each industry will have different cultural and business nuances that will need to be understood. Your plan will change and evolve with your market, but if you commit to staying relevant by listening to your audience and successfully communicate your compliance issues to your users, you’re on the path to success.
And if you’re wondering what a Lamington is…. they’re worth the 15 hour plane ride.
This week, the Federal Financial Institutions Examination Council (FFIEC) released “Social Media: Consumer Compliance Risk Management Guidance. The FFIEC is asking for comments within sixty days. You can download the 31-page document here.
Its release has created quite a stir within the banking industry. A comprehensive article appeared on TheFinancialBrand.com, “Regulatory Shocker on Social Media in Banking Coming Soon” that summarizes the guidance quite nicely.
But . . . what’s so shocking?
We’ve been having the same conversations in the securities industry for three years. And in those three years, firms have learned that there are three major areas of risk that need to be mitigated before deploying social media:
- Security: your IT department needs to prevent your firm’s proprietary and client information from being leaked out either inadvertently or maliciously from the enterprise. They also need to ramp up malware protection. That’s because social media users are susceptible to incoming threats as they view themselves as part of a tribe and tend to click on any link sent by a “friend.”
- Compliance and Governance: your legal and compliance departments already know that there are thousands of rules and regulations that govern the communications and advertising of publicly held corporations, firms in general, and bank specifically. Take the securities industry as an example – the banking regulators aren’t issuing new rules and regulations around social media. Social media is viewed as just another form of written communications. Your compliance department is therefore challenged to interpret existing rules as they apply to social media and to develop and enforce firm policies.
- Enablement: your executive team is concerned about productivity and the bottom line. Now that every employee can be the face of the business, you either have a powerful marketing tool or your worst nightmare. Employees will need to be trained on how to use social media effectively to meet the firm’s goals, such as nurturing existing clients, attracting new business, recruiting, and brand awareness.
However, during the last three years, we’ve learned that all these risks can be mitigated by strong corporate polices, backed up with technology and training.
So far, so good. Nothing new here. Or is there? In addition to what we’ve already seen from other regulators, the FFIEC specifically also calls for:
- Creation of policies to address negative feedback or customer complaints, even if a financial firm chooses not to actively engage in social media.
- Monitoring to protect the firm’s brand identity
- Due diligence and oversight for third-party vendors that firms may hire in connection with social media
And the one that I find most interesting:
- Processes and reporting to demonstrate how social media “contributes to the strategic goals of the institution.”
In other words, the FFIEC recommends that firms measure the ROI of social media.
It will be interesting to see the reaction that FFIEC gets from the industry. I just hope that the banking industry can use some of the key learnings from the securities industry to streamline the processes to reap the benefits of “getting social.”
For more details on how to deploy social media within retail banking, you can also check out Belbey Blogs: Upcoming Guidance for the Use of Social Media for Retail Banking from FFIEC.
Recently a customer in the financial sector told us they no longer had to justify the ROI of social media as a pre-requisite for using it for business; that debate was over. This is amazing considering just two years ago our financial institution customers were deciding if a) social media had any business value at all, and b) if Compliance would even allow its use.
In 2011 and 2012, organizations moved from discussing why and how they should use social to witnessing information workers use it in their daily business. In 2013 we will see enterprises start to integrate social into their business processes.
Forward leaning companies recognize that social is a way of doing business, not a distinct activity or channel of communication. As such, social capabilities and practices need to be integrated into your enterprise systems – from CRM and content management to ERP and compliance. A customer or prospect responds to a post made on LinkedIn, it should be noted in their CRM record – automatically. A Financial Advisor sharing an interesting research article with their network should be able to do so right from the content management system-automatically. A fan makes a comment or product suggestion on your Facebook page? It should appear in your customer service or product management systems- automatically.
Gartner predicts that by 2015, the 20% of enterprises that employ social media beyond marketing will lead their industries in revenue growth. A study conducted by Javelin Strategy & Research found that by the year 2015, Generation Y spending will approach $2.5 trillion – and in 2018, the annual income of Gen Y-ers will surpass $3 trillion.
If you plan to do business with them, be social!
I’m looking forward to this year, as we are primed to help organizations unleash social business with a strong line-up of new products and services. In addition to extending and enhancing our technology platform, we are investing in experts to assist companies integrate our platform into their enterprise systems to successfully impact business processes. The days of social being used as a single point solution by a few on their lunch breaks are truly over.
Many analyst firms are releasing numbers on expected growth and spending for social software, collaboration and IM platforms in 2013. Besides the challenge of social scale complexity, there are other trends that we at Actiance predict, notably around BYOD, compliance and more.
You can read more about these predictions here .
In future blogs I’ll share with you insights about the blurring of the line between personal and professional use of social, as well as content, compliance and distribution. Till then.
When I started my career, I couldn’t have imagined how social my online work world would become.
Things like LinkedIn®, Microsoft® Lync®, IBM® Connections, and Skype™ are so integrated into my workday that connecting, IM’ing, and blogging with colleagues are all as natural and effective as sitting face-to-face over coffee.
Just like new ways to keep in touch with my colleagues and friends have emerged, some headed for the sunset like long-time friend Microsoft Live Messenger. But don’t say “Bon voyage!” just yet. You can use your Live ID to move your Live Messenger account and contacts to Skype today.
And if you’re a Skype user who works in a regulated industry like financial services, or if you work for a company that has other strict legal or corporate governance requirements, Actiance has great news! With Vantage™ for Skype, you can use Skype on your company’s network to stay in touch with the folks you need to get things done in a safe and compliant way.
It gives your company the tools it needs to meet strict requirements for regulatory, legal, and corporate compliance across a wide variety of networks, including Skype. And for a limited time, existing Actiance customers using Vantage or USG to support Microsoft Live Messenger can enjoy special pricing on Vantage for Skype.
So go ahead and start a Skype chat with a buddy in Santiago, share the latest product news with a colleague in Paris, or send a vacation photo to a friend in Vienna. With the trusted governance the Actiance platform provides, you can be sure you’re keeping the good stuff in while keeping the bad stuff out.
As human beings, our behavior hasn’t changed for centuries. We naturally socialize. Socializing our buying decisions is something that we have done for centuries. Social media simply allows us to connect with those wider social groups—geographically—making our social groups more potent as our social interactions become public through social media.
As social media continues to evolve, so too does its usage and the regulations surrounding those professions adhering to compliance requirements. Starting in 2010, the Financial Industry Regulatory Authority (FINRA) issued regulatory notices to provide guidance regarding the use of social media in the financial services profession, specifically Notice 10-06 and then in 2011, Notice 11-39.
Why haven’t more financial services firms embraced social media as part of their sales and marketing programs?
Some of the key reasons are regulatory.
FINRA, the Securities and Exchange Commission (SEC), and several other regulatory bodies outside the U.S., each impose strict guidelines and rules on the use of all electronic communications, including social media. This demands careful oversight of online communications and activities to ensure that financial advisors aren’t using social media channels inappropriately or without retaining records of all communications.
A sampling of Social Media-Related Notices and Rules
- FINRA Regulatory Notice 10-06: Summary: Static content on social media sites and blogs are considered advertisements and need to be pre-approved. However, interactive content, like chat rooms, is considered non-static and does not require pre-approval by a registered principal prior to use.
- FINRA Regulatory Notice 11-39: Summary: To answer some of the questions raised by Notice 10-06, this notice clarifies that it’s the content of the communication rather than the channel that is being reviewed. Firms are also subject to the “adoption” and “entanglement” theories regarding third-party posts, and that business communication through personal devices must be supervised and recorded.
- NASD Rule 3010: Summary: Members must establish, maintain, and enforce written procedures for communications of registered representatives
- IRS Circular 230: Summary: Tax professionals could be subject to penalties regarding written advice, including their use of social media such as blogs, and Facebook, LinkedIn, and Twitter comments.
- New FINRA Rule 2210 (effective February 2013): describes various communications categories (institutional, retails, correspondence), and approval, review and record keeping requirements for each
- SEC Rules 17a-3 and 17a-4: require written, enforceable retention policies, searchable index, viewable and readily retrievable, offsite storage, and storage of data on WORM (write once, read many) optical media
In addition to making sure they adhere to the rules and regulations, firms are also concerned about the risks of data leakage, malware, and viruses. However, as new technologies have emerged to address regulatory and security challenges, financial service firms are demonstrating to their senior management that the risks of using social media may be mitigated.
What it all boils down to is this. Before engaging in any social media activity for your firm, be aware of the regulations surrounding social media in a professional services firm. Take them into consideration and demonstrate that you have taken a thoughtful approach. Put the review process into place. And most importantly, identify an influential principal of the firm who will champion the effort. It’s worth the effort. As firms slowly adopt social media within their distributed teams as a means to reach out to clients and customers, they are beginning to see increases in new customers and revenues that more than offset their initial concerns about the risks.
I just got back from a quick trip to the Great White North. NHL teams are still locked out, which might explain the forlorn look on folks I met or walked by. Luckily, the absence of hockey didn’t put a damper on IIROC’s Compliance and Legal Section (CLS) annual conference. Sessions were lively and informative, especially the social media one, and people seemed generally optimistic that the NHL season could still be salvaged. It was optimism all around.
Much like its FINRA brethren, IIROC has its own social media-specific guidelines in the form of Notice 11-0349. I swear, looking at FINRA’s 10-06/11-39 and IIROC’s 11-0349 side-by-side, you’d think you were seeing double. Even the session topics looked similar to what you’d see at the FINRA events. Just like in the States, the social media session was packed.
At the IIROC one, the panel consisted of an attorney, a compliance officer, and a marketing executive – the exact same key stakeholders you see involved in social media enablement efforts south of the border. In fact, as a whole, I got the impression Canada is not so far behind the US in terms of adoption of social in the financial services industry.
I heard repeatedly that Canadian firms were slowly opening up access to social and getting the ball rollin’ on pilot programs. So, the trend seems to be that, if you’re a financial institution, you should at least be considering social or else you’re gonna be left behind. That was the consensus of nearly everyone I spoke with.
2013 is just around the corner, and I’m expecting big things out of our friends up north. They’ve had a year to take notes from their US counterparts, guidelines are in place, social media policies are being drawn up, and there’s a still chance for an NHL season.
We just need Rush to belt out “O Canada” and all will be good.
Last week I had the privilege to present on Social Media in Ethics & Compliance as the invitation from the UC Berkeley Center for Executive Education. Thought leaders from banking, health care, energy and other regulated industries were present to discuss the challenges facing their professions with the growth of social media and the blurring lines between personal and professional content and use. Although each group is regulated differently, the concerns are the same. How do we control what others say, and is the associated risk of social media adoption worth the potential rewards? As a group we concluded that the answers are not universal or easy to attain as each organization approaches social media according to their own industry and policy. However, what we could agree on was that it can no longer be ignored that social media is pervasive in the workplace and that it needs to be addressed- even if it means that participation is not an option.
Not having a social media policy is a policy- and in general not very good one. So my recommendation to those that are keeping it at bay is to at the very least spell out for your employees WHY you have chosen not to participate, and outline the consequences for breach. It reminds me of the Nancy Reagan “Just Say No” anti-drug campaign of the 1980s. Although effective in building awareness- it wasn’t enough, because you’ve got to give people something to say YES too.
At Actiance we recognize that Financial Services firms and other regulated industries are completely justified in not wanting to use social media.
So with all these risks, and costs, it is easy to understand why so many firms’ social policy is still simply, “NO.” However, I would argue that the risk of doing nothing NOW is worse for a host of reasons.For one, by being overly cautious, your firm will blend into the vast majority of other firms not using social media and lose its competitive advantage. The window for opportunity in social is not going to be open for too long, and early adopters will be rewarded by recruiting the next generation of advisors and investors. Although there is always the risk of making a misstep, early adopters to any new technology stand out from the competition and tend to be forgiven for their mistakes more easily. Another factor to consider is that going forward by not participating, you risk having your brand being seen as non-innovator which could negatively affect the perception of customers, employees and suppliers. You will also miss out on opportunities to build awareness for your brand and to improve efficiency of learning, teaching and research, left with using costly traditional research methods.
However, the most serious risk of not using social media is that your firm will be unable to interact with customers in the manner they prefer. Let me say that again… THE MANNER THEY PREFER! This is not about you, it’s about them.
Financial services firms tend to think that as their customers are older, they don’t use social media. However, this is not borne out by facts. Although Generation Y and X are the most enthusiastic users (with 87% and 77% respectively), more than 47% of Boomers use social media in some form*. That should be incentive enough. However, predictions for the future are even more interesting.
Today, in the U.S., Generation Y accounts for $2.4 trillion worth of personal income and by 2025 Generation Y will account for 46% of personal income**. In other words, by not using social media, your firm risks not using the preferred method of communication for people who control nearly half of all the personal wealth. I think leaving half of all the wealth in the United States on the table seems like a very big risk indeed. Is it one you can afford to take?
* USA, Source: Forrester Research, June 2011
**Javelin Research http://www.stltoday.com/business/local/article_719f49d8-15e6-5c5d94b7992ab12d9f97.html?print=1
Although the Financial Services Bill is still going through the House of Lords, in less than nine months time the demise of the FSA will be complete. Its replacements, the PRA (Prudential Regulatory Authority) and the FCA (Financial Conduct Authority) have issued guidelines on their approach, but their current lack of detail on financial promotions has left many firms confused about the future.
The biggest initial change I think we are going to see is not new guidelines, but a stricter enforcement of the current ones with heavier fines for those that stretch the mark. One of the contentious issues around this is the proposed public “early warning” notices of firms that do not comply and the cutting of the right to reply from 28 to just 14 days.
The FCA guidelines state: The government intends that the FCA will have new powers in product intervention; to direct firms to withdraw or amend mis-leading financial promotions with immediate effect; and to publish the fact that a warning notice in relation to a disciplinary matter has been issued.
Besides the problem of drawing adverse attention to a potentially innocent firm, there are other issues to consider. Retrieving the evidence of a print or email-based marketing campaign to argue your case is relatively easy, but trying to collate proof around a social media campaign that’s taken place over several different platforms is time-consuming without an adequate contextual archive.
14 days is a long time if warning notices are issued and waiting that long to demonstrate publicly that it was within the regulation is not really an option for a firm looking at damage limitation and protecting its reputation. A successful, or indeed notorious, social media campaign that’s been running for just a week can produce a vast amount of content that will need to be reviewed. But working out who said what, who saw what, whether they were public messages or private DMs takes time if you’re doing it manually or using disparate databases. Not to mention the additional headache if the campaign actually ended months before.
In addition, the PRA outlines that it may even intervene in a financial institution’s business, citing the Japanese Financial Services Agency that in 2009 banned the retail division of a large financial institution from advertising and running sales campaigns for one month after it failed to maintain required standards to control money laundering.
We’ll have to wait until October when the House of Lords meets again to discuss the Financial Services Bill to see if the early warning notices will remain, but either way there are several things firms can do now in preparation for the final transition.
Review your risk within the current FSA guidelines, amended your policies and procedures if you find them lacking and starting thinking about using technology not just to enforce them, but to help you understand the situation and react quickly if something does go wrong. Even better, put a strategy in place that allows for real-time monitoring, compliant logging and archiving and content control that means that even if audited, you know you are safe when using Social Media as part of a marketing portfolio. The cost of implementing such an approach will always be significantly lower than the potential penalties for not doing so.
After last month’s annual FINRA conference wrapped up, the Actiance team decided to stick around for an extra day to stop by FINRA headquarters and meet up with some key folks in the Advertising Regulation division to talk about social media and technology. Judging by how many social media-related sessions there were at the conference (that would be 3), social is definitely a hot topic these days for FINRA, the SEC, and their regulated entities.
This is a marked change from the last annual conference when only Regulatory Notice 10-06 was in play. Now, there’s also Regulatory Notice 11-39, a FINRA social media sanction (Jenny Ta), an SEC risk alert on social media, and an SEC enforcement action (Anthony Fields) to gnaw on. What all this points to is continued interest in social media by the regulatory bodies and the firms they oversee. As technology chugs along to keep pace with the social media train, so too is the need for regulators to “stay in touch” with what’s going on out there, hence, our visit to Rockville, MD.
And just as FINRA looks at social media to see how the latter is used by member firms for marketing and advertising, the regulator is also curious as to how technology is aiding firms in their marketing initiatives while also remaining compliant with FINRA guidelines. In many ways, it’s a symbiotic relationship: regulatory guidelines create a business driver for firms like Actiance, while technology helps member firms stay compliant.
Actiance maintains ongoing dialogues with all the key regulatory bodies, which paves the way for the ideal mix of features and training that helps our customers achieve their marketing and compliance objectives. Because we understand what the regulators are looking for, their mindset, and the direction they’re headed, we’re able to design our platform and training programs accordingly. Case in point: Actiance was instrumental in persuading the SEC to incorporate social media into Rules 17a-3 and 17a-4. Because we cut our teeth in the IM world, we have the expertise and credibility to regularly engage with regulators and educate them on the technology trends that they need to be wary of when thinking about future guidelines.
Certainly, in an industry known for its strict guidelines and regular audits, a technology partner that understands these rules is vital indeed for ensuring that all FINRA-regulated firms can confidently deploy these technology solutions to remain compliant. Actiance in particular has ex-FINRA members, attorneys, and financial industry pros on its staff to eliminate any confusion or doubts customers might have on what is necessary to ensure compliance in a world of dynamic communication channels.
We confidently believe that social media won’t go away any time soon, so we envision the symbiotic relationship continuing, evolving, and flourishing.
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