Friday, December 3, 2010

Bloomberg: Tweeting Restrictions Risk Leaving Brokers Without Much to Say

Boy oh boy, do I know a lot about this issue as of late. With super regulators swarming all around, the financial industry is WAY behind the rest of corporate America in terms of social media.  With all the potential hounding and fines (think airport patdown every time you want to say something), it appears most have simply given up trying.  But being a small guy, social media is one advantage you can parlay - if you can figure out what the heck is actually allowed.  No black and white in this world.

Via Bloomberg:

  • Social media sites such as LinkedIn and Twitter are redefining the way businesses reach their customers. Securities firms are largely absent from the revolution.
  • Regulators and company rules at brokerages have slowed the adoption of social media by the financial services industry, said Margaret Paradis, a New York-based partner at law firm Baker & McKenzie, who advises brokers and fund managers. Firms banning employees from using sites such as Facebook, LinkedIn and Twitter are limiting access to cheap and easy-to-use competitive tools, she said.
  • ‘By ignoring social media, you risk not being out there where your clients are.’’
  • About 84 percent of U.S. brokerage firm employees polled by HNW said they don’t use social media because company and industry regulations make it too burdensome, she said.
  • The U.S. Securities and Exchange Commission, which regulates the securities industry, says all broker stock recommendations must be ‘‘suitable” for individual clients by measuring their risk tolerance, security holdings, income, net worth and investment objectives, according to the agency’s website. Tweeting a stock pick or posting it on Facebook generally breaks this rule, said David Sobel, executive vice president and compliance officer at New York-based Abel/Noser Corp., which helps clients lower trading costs and does allow its employees to use LinkedIn for networking.
  • Firms such as Bank of America’s Merrill Lynch & Co. and TD Ameritrade Holding Corp. generally restrict all broker-to- investor interaction on social media sites because of concerns they may violate SEC rules and those of the Financial Industry Regulatory Authority, the non-governmental body that oversees almost 5,000 brokerages. 
  • Brokers who break the rules may be fined or suspended for communicating in a manner that’s viewed as intentionally or recklessly misleading, Finra said.
  • Finra requires companies to supervise and store all broker- client exchanges, such as e-mails and now Twitter posts and Facebook updates
  • Brokerages also are required to approve most postings on websites, Tom Pappas, vice president of advertising regulation at Finra, said in an interview. Finra released a regulatory notice in January with guidelines for firms using social media. “We issued these standards to help firms understand and follow the rules,” Pappas said.
  • Vanguard Group, the Valley Forge, Pennsylvania-based investment manager, now permits employees to use Facebook and LinkedIn as long as specific investment recommendations aren’t given.  Vanguard’s competitors, such as Charles Schwab Corp., TD Ameritrade, and Merrill Lynch use Facebook pages for general information and marketing without providing specific investment advice. Six in 10 financial firms consider themselves to be social media novices or beginners, the study said.
  • Companies that actively engage potential customers will see better results if they integrate social media into current sites. Creating a sense of community with clients is crucial, Shevlin said.


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