“On social media, you don’t know who your followers are or
who they could be passing that information around to,” Belbey said. “And you
can’t possibly have a good clear understanding of their needs to make
appropriate recommendations.”
Another issue on Twitter is retweeting third-party content
such as newspaper articles. Through the Securities and Exchange Commission’s (SEC’s)
concept of “adoption and entanglement”, firms can become responsible for
third-party content by a retweet, which could be construed as an endorsement.
Monitoring
Firms must have a social media policy that is compliant with
SEC and FINRA regulations, test it and be able to prove to the regulators that
they have done so. For a firm that prohibits social media, that can be easy as
a web search.
However, if a firm allows use of social media, it needs to
monitor it and block access to certain features, which can be problematic for
compliance.
Software, like the kind Bockius’ and Belbey’s companies
provide, can block access to the “like” feature on Facebook or the
recommendation feature on LinkedIn. It can also set up an approval process and
be especially beneficial for larger firms that have to review lots of
information.
“If you think about a firm with 10,000 advisers and all the
LinkedIn profiles that need to be approved, that can be a pretty daunting
task,” Bockius said. “Having the software to streamline that process is really
critical.”