Compliance: Do you need to archive your social media comms?
What compliance issues are advisers storing up through unrecorded use of social media? Rob Kingsbury spoke with James Thompson of Smarsh UK
As advisers increasingly use social media to communicate with clients, prospects and the wider market, what dangers are they storing up from a compliance perspective?
While financial services firms in the UK have the solutions in place to record electronic communications like email, with advisers most commonly recording email communications via their back-office system, as social media has grown in use a similar necessity to record and archive what is being said has not as yet hit firms’ radars.
James Thompson, regional director of Smarsh UK, believes there will be a growing demand from firms of all sizes to record social media communications as regulation tightens in this area.
“In the US the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) require that financial services firms they regulate must hold and be able to produce copies of electronic communications including social media for 7-10 years. “If they can’t, the simple fact is they get fined,” he adds.
“We are starting to see the UK go down the same route. The FCA guidelines issued in March 2015 were a bit woolly but a simple translation would be that ‘it is not enough to rely on your social media provider to provide a back-up of your social media communications’.
Once it’s out there…
The danger for adviser firms, Thompson says, is that social media communication by its very nature is a way of reaching out to hundreds or thousands of people, it’s free flowing and “once it’s out there, can rarely be taken down”. Where the FCA may get involved, he says, it will be a necessity to have accurate records of what was actually said, “if only to show that what was said wasn’t misleading or was taken out of context”.
He adds: “The problem for firms is how do you collate and produce for the regulator what every employee has said via Twitter, Facebook, LinkedIn and Instagram? You just couldn’t do it without having a system that automatically records those communications.”
According to a survey conducted by Smarsh UK, 25% of financial services firms had been asked by the FCA to provide records of their social media in their last examination by the regulator. Thompson says that while at present the FCA has not issued a fine to any advisory firm in respect of regulatory transgressions made via social media, the free flowing nature of social media means that, inevitably, it will happen. “The FCA is taking a tougher stance and fines will be issued.
“The fact is that social media is becoming a more widespread and important platform for financial adviser firms and it needs to be done compliantly and that’s something we can help firms to look at. Our survey showed that the majority of firms have no solution in place to either retain or monitor social media. There is a compliance gap.”
Practicalities of an archiving service
The practicalities of implementing an archiving system are simple, says Thompson. “We partner with all the major channels, so the adviser firm simply decides which social media channels it wants monitored, authenticates permission for Smarsh to archive the communications with the channels themselves, and through APIs we then archive via a direct feed from the source provider. What we don’t have access to is passwords,” he stresses, “So we can never have control over a firm’s social media.”
He adds: “There is zero technical expertise or IT requirement needed to use the service. The interface is really easy to use and every bit of the information is stored in the format in which you’d see it on the social media channel, so it is easy to read. Also, everything is recorded – so every time something is posted, changed or deleted, it is recorded. It’s failsafe.
“We provide the service across multiple content types and that is important because social media is a mix of communications. And if the firm needs to access the archive to provide data for the regulator, for example, they can just export it.”
Asked about charges for the Smarsh service, Thompson said the firm charged monthly on a per person per content-type package. “The Smarsh platform is offered as a service, and prices are charged on a monthly basis. The starting platform fee is £50, and then there is a content fee of £6.50 per user, per social media type.”
Compliance consultant view
Steve Bailey director of compliance consultancy ATEB says: “As use of social media grows among adviser firms so it is likely to feature ever more clearly on the FCA’s radar. There are potential dangers for adviser firms when using social media and having the ability to record and access social media communications should a complaint be made could be useful.
“It is more important to my mind, for firms to take preventive action, training staff in the correct use of social media channels, particularly around financial promotions as highlighted in the FCA Final Guidance paper 15/4.
“Social media like Twitter makes it easy for people to talk to one another in an informal way, which means there can be quick fire exchanges. But the problem with Twitter, for example, is that you are limited to 140 characters at most and it can be difficult to get across the full meaning of what you want to say within that limit.
“The other issue, with any kind of social media, is that you don’t know who is reading it, so you don’t know how what you’ve written is being construed.
“People have to keep in mind that there are compliance constraints when using social media and act accordingly.”
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