© 2018 Financial Industry Regulatory Authority, Inc. All rights reserved. 1

Building and Maintaining an Ethical Culture Wednesday, May 23 8:30 a.m. – 9:30 a.m. This session addresses some of the professional conduct considerations for securities attorneys and compliance professionals who serve in compliance roles and how they can navigate the more common potential ethical quandaries they may face. Moderator: Patricia Albrecht Senior Director FINRA Member Relations and Education Panelists: Marion Halliday Senior Vice President and Chief Compliance Officer Janney Montgomery Scott, LLC Michael Rufino Executive Vice President FINRA Member Regulation, Office of Sales Practice Kurt Schacht, JD, CFA Managing Director for CFA Institute's Advocacy Group CFA Institute

© 2018 Financial Industry Regulatory Authority, Inc. All rights reserved. 2

Building and Maintaining an Ethical Culture Panelist Bios: Moderator: Patricia Albrecht is a senior director with FINRA’s Member Relations and Education Department and manages the FINRA Institute at Georgetown Certified Regulatory and Compliance Professional (CRCP)® program and FINRA’s Half-Day Compliance Boot Camp program. Previously, she was an associate general counsel in FINRA’s Office of General Counsel, and served in the same role at NASD before its 2007 consolidation with NYSE Member Regulation, which resulted in the formation of FINRA. She also has worked at the U.S. Securities and Exchange Commission in various offices and departments, including the Office of General Counsel and the Division of Trading and Markets, and serving as a counselor to Commissioner Norman Johnson. In addition, Ms. Albrecht worked for several years as a staff attorney at the U.S. Federal Fifth Circuit Court of Appeals and completed a federal judicial clerkship with U.S. District Court Judge Harry Lee Hudspeth. Panelists: Marion Halliday, Senior Vice President of Janney, Montgomery, Scott LLC, is originally from Louisville, Kentucky. She received her BA with honors in History from Dartmouth College and then graduated from University of Virginia School of Law, where she was a Dillard Fellow and served on the editorial board of the JOURNAL OF LAW AND POLITICS. After law school, she clerked for a federal appellate judge, the Honorable Boyce F. Martin, Jr. of the Sixth Circuit. Ms. Halliday then practiced corporate law at Kentucky law firm, Frost, Brown, Todd (formerly Brown, Todd & Heyburn). She was subsequently appointed head of the Kentucky Division of Securities where she led a group of industry representatives, lawyers, and scholars in the re-writing of the Kentucky Securities Act. At the conclusion of her government appointment, she became Associate Director of Compliance at Hilliard Lyons. Then, in 2009, Ms. Halliday joined Janney, Montgomery, Scott LLC as Chief Compliance Officer for the Private Client Group; in 2014, she became Chief Compliance Officer for the Firm. In addition to her compliance responsibilities at Janney, she, along with other senior women leaders, co-founded “WIN,” Janney’s Women’s Interactive Network. Ms. Halliday is a respected industry leader and public speaker, serving on various SIFMA and FINRA advisory committees and programs. In addition to her legal license, she holds various industry licenses including the Series 7, 14, 24, and 66. For several years, Ms. Halliday served on the FINRA Series 24 Content Committee, which assists FINRA in developing test questions for various supervisory licenses including the Series 24, 23, 72 and 11, as well as served on the FINRA CE Council. She is also an active member of SIFMA’s Compliance Regulatory Policy Committee as well as the Regional Firms GC and CCO working group. When she is not working, Ms. Halliday is a board member of the Philadelphia-based non-profit Legacy Youth Tennis foundation. Michael Rufino is Executive Vice President and Head of Member Regulation—Sales Practice. In this capacity, he is responsible for overseeing FINRA’s Sales Practice examination and surveillance programs in 14 District offices across the United States as well as the Membership Application Program. Mr. Rufino began his regulatory career in 1988 at the New York Stock Exchange where he held many management positions. He has been with FINRA since its creation in 2007. Prior to serving in his current capacity, Mr. Rufino was the Chief Operating Officer in Member Regulation—Sales Practice responsible for the day-to-day execution of the Sales Practice Regulatory Program. He has been involved in various industry initiatives throughout his career in regulation involving electronic communications and anti-money laundering and has been a speaker on an array of topics relating to the securities brokerage industry. In addition, Mr. Rufino is a representative on FINRA’s Compliance Advisory Committee and is the Chairman of the Options Self-Regulatory Council. Mr. Rufino has also served as a member of the Securities Industry Continuing Education (CE) Council, assisted in the creation of Electronic Communications Guidance to the industry and served as a member of the Social Networking Task Force. In addition, he participated in the Financial Action Task Force’s (FATF) initiative to create guidance on the risk-based approach to the prevention of money laundering and terrorist financing as well as the FATF Typology on the Securities Industry. He previously served as FINRA’s representative on International Organization of Securities Commissions’ (IOSCO) Committee 3 on Intermediaries. Mr. Rufino graduated magna cum laude from Iona College with a degree in finance, and received his MBA with honors in management information systems from Iona.

© 2018 Financial Industry Regulatory Authority, Inc. All rights reserved. 3

Kurt N. Schacht, JD, CFA is Managing Director for CFA Institute’s advocacy group. He has overseen CFA Institute policy research, standards and government relations area, with offices in London, Brussels, New York and Hong Kong. During his tenure he has been responsible for the CFA Institute Code of Ethics and Standards of Professional Conduct, the Global Investment Performance Standards (GIPS®), and the CFA Institute Asset Manager Code and one of its flagship publications, the Financial Analysts Journal. Prior to joining CFA Institute, he served as chief operating officer for a mutual fund complex, general counsel and coo for a Manhattan based hedge fund, and as deputy director and chief legal officer for the State of Wisconsin Investment Board (SWIB). He is an industry practice expert on investment management, corporate governance and financial service industry regulation, including Investment Company Act and Investment Advisers Act rules and practice. Mr. Schacht is currently serving as a Trustee on the IFRS Foundation which oversees the International Accounting Standards Board (IASB). He is a member of the European Commission's Expert Group on Corporate Bond Market Liquidity based in Brussels. His term recently expired as Chairman of the Investor Advisory Committee for the U.S. Securities and Exchange Commission (SEC), created by the Dodd-Frank Act. He also serves on the Harvard Corporate Governance Forum Advisory Council, the Board of Trustees for the Greenwich Roundtable and the Advisory Board of the Columbia Law School’s Millstein Center for Global Markets. He previously served on the Public Company Accounting Oversight Board (PCAOB) Standing Advisory Group and the SEC’s Advisory Committee for Smaller Public Companies looking at the market impacts of Sarbanes Oxley and the Expert Group for Principles for Responsible Investment of the United Nations Environment Programme (UNEP). He is a member of the CFA Society New York and was voted their 2004 Volunteer of the Year. He holds a Bachelor of Science degree in Chemistry and a Law degree from the University of Wisconsin-Madison. He has held the Chartered Financial Analyst (CFA) designation since 1998.

2018 FINRA Annual ConferenceMay 21 – 23, 2018 • Washington, DC

Building and Maintaining an Ethical Culture

FINRA Annual Conference | © 2018 FINRA. All rights reserved.

Moderator

Patricia Albrecht, Senior Director, FINRA Member Relations and Education

Panelists

Marion Halliday, Senior Vice President and Chief Compliance Officer, Janney Montgomery Scott, LLC

Michael Rufino, Executive Vice President, FINRA Member Regulation, Office of Sales Practice

Kurt Schacht, JD, CFA, Managing Director for CFA Institute's Advocacy Group, CFA Institute

Panelists

1

FINRA Annual Conference | © 2018 FINRA. All rights reserved.

Under the “Schedule” icon on the home screen,

Select the day,

Choose the Building and Maintaining an Ethical

Culture session,

Click on the polling icon:

To Access Polling

2

FINRA Annual Conference | © 2018 FINRA. All rights reserved.

1. What statement best describes your firm:

a. Traditional retail brokerage

b. Independent channel

c. Non-retail (e.g., capital markets)

Polling Question 1

3

FINRA Annual Conference | © 2018 FINRA. All rights reserved.

2. Does your firm have a Chief Ethics or Conflicts

Officer?

a. Yes

b. Not formally, but someone does have responsibility for

ethics/conflicts issues.

c. No. I do everything.

Polling Question 2

4

FINRA Annual Conference | © 2018 FINRA. All rights reserved.

No general FINRA ethics rule.

FINRA Rule 2010(Standards of Commercial Honor and

Principles) is sometimes cited for practices considered

What are Ethical Practices?

Can be hard to define – but we know it when we see it.

Legality is not always the best guide.

Just because it is legal doesn’t mean it is ethical.

Ethical Practices

5

FINRA Annual Conference | © 2018 FINRA. All rights reserved.

Main Street Brokerage – a dually registered small BD/IA with a dozen

registered persons in Small Town, USA.

Shirley Temple – a high-producing branch manager of Main Street

Brokerage and high school friend of Jacki Daniels.

Jackie Daniels – wealthy client of Shirley’s.

Jimmy Beam – a recently-hired investment adviser. Jimmy is Shirley’s

nephew and previously was a junior accountant at Jackie’s

manufacturing company.

Poppie Van Winkle – Jackie’s step-daughter and Jimmy’s girlfriend. She

works as a local event planner.

Ethics Scenarios – Cast of Characters

6

FINRA Annual Conference | © 2018 FINRA. All rights reserved.

Jackie owns MINE, Inc., a manufacturing company that is the town’s

largest employer, and ALSOMINE, a private golf club that offers

membership only by invitation.

Jackie serves as the plan administrator of MINE, Inc.’s retirement

savings plan and recently chose Main Street Brokerage as the sole

investment adviser for MINE, Inc.’s retirement plan, with the

understanding that her friend, Shirley will act as the advisor to the

retirement savings plan.

Jackie also is an aspiring politician and has decided to run for the U.S.

senate. Jackie has hired Poppie as one of her campaign staff to plan

campaign events.

Ethics Scenarios – Key Facts

7

FINRA Annual Conference | © 2018 FINRA. All rights reserved.

Keeping it All Straight

8

Jackie DanielsOwner MINE and Alsomine Golf Club

MINE’s 401k Plan AdministratorU.S. Senate Candidate

Shirley TempleProducing Manager

RR for Jackie and MINE 401kOld friend of Jackie’s and Jimmy’s Aunt

Jimmy BeamRR – reports to ST

Used to Work for Jackie as an AccountantPoppie’s Fiancé and Shirley’s Nephew

Poppie Van WinkleParty Planner

Jackie’s Step Daughter and Jimmy’s Fiancée

Main Street Brokerage

FINRA Annual Conference | © 2018 FINRA. All rights reserved.

Jackie and Shirley often play golf at ALSOMINE.

Jackie doesn’t think Shirley can afford the club fees, so Jackie

pays them for her.

Shirley knows that even though Jackie owns the golf club, the

guest fees are high. In return, she often will take Jackie to the

local steak restaurant.

Jackie tried to give Shirley an expensive bottle of wine for

Christmas, but Shirley adamantly refused, saying that accepting it

would violate the strict no-gifts policy at Main Street Brokerage.

Ethics Scenario 1: Gifts to and From Customers

9

FINRA Annual Conference | © 2018 FINRA. All rights reserved.

3. Presuming your firm has a gifts policy, and the wine

is $100, would Shirley be allowed to accept the gift?

(Audience can only select one option)

a. Yes, it is within a de minimis amount.

b. No, we have a strict no-gifts policy.

c. Yes, we have an exception clause that allows expensive gifts

if fully disclosed.

Polling Question 3: Scenario 1

10

FINRA Annual Conference | © 2018 FINRA. All rights reserved.

Shirley agrees to let Jimmy host an open house at the Main Street

Brokerage office to attract clients.

Jimmy hires his girlfriend Poppie to plan the event.

Poppie uses Jackie’s contacts to plan the guest list.

Poppie also places a mason jar at the center of each table with a

label reading “Support JD for U.S. Senate” and uses the office’s

paper supplies and printer to produce some flyers for Jackie’s

campaign.

At the dinner, Jimmy asks Poppie to say just a few words about

Jackie and her campaign.

Scenario 2: Political Contributions and Using

Employer Resources

11

FINRA Annual Conference | © 2018 FINRA. All rights reserved.

4. Does Shirley have a responsibility for who is attending and what a non-employee, Poppie, may say at the event since she agreed to let Jimmy, her employee, host the event:

a. Yes, Shirley should pre-approve attendees, speakers (including non-employees) & speaker content.

b. No, because guests may bring uninvited friends & Shirley can’t predict what a non-employee may say.

c. Yes, but only for attendees, speakers, & employee speaker content.

Polling Question 4: Scenario 2

12

FINRA Annual Conference | © 2018 FINRA. All rights reserved.

Poppie and Jimmy decide to get married and Jimmy asks Shirley if they can use the office for the wedding reception.

Jimmy also tells Shirley that Poppie and he have started a Kickstarter campaign to pay for their wedding costs.

Shirley sees a post on Main Street Brokerage’s Facebook page talking about the wedding and providing a link to the Kickstarter campaign. Some clients contribute before Shirley can take down the post and link.

After the wedding, Shirley finds out that Jackie’s wedding gift was a check to cover the wedding costs, which ended up exceeding the funds raised via Kickstarter. The happy couple donate the Kickstarter funds to Jackie’s political campaign.

Scenario 3: Social Media Use

13

FINRA Annual Conference | © 2018 FINRA. All rights reserved.

5. Does your firm allow marketing through social media

(outside of FA static page linked to Firm website)?

a. No – no outside marketing is allowed An FA website must be

an extension/link back to firm website.

b. Somewhat – An FA may use limited static social media (eg

have a FB page, but no posting/chatting.

c. Yes – An FA may use social media (FB, twitter, etc) and also

communication through those platforms.

Polling Question 5: Scenario 3

14

FINRA Annual Conference | © 2018 FINRA. All rights reserved.

Thank you for attending!

Building and Maintaining an Ethical Culture

15

CFA Fair Dealing Scenario

Korloff is a money manager for several clients. One of the clients, a pension fund, accounts for 35% of the assets under management at Korloff’s firm. The fund pays more management fees to the firm than any other client. The Executive Director of the pension fund has made it clear that, because of this dominant position, she expects Korloff to give the pension fund “enhanced service” service in the form of advanced information on investment recommendations, priority position for initial public offerings, supplemental research reports on potential investments, and daily personal contact. Korloff should:

A. Refuse to comply with this request. B. Comply with this request, only if Korloff’s preferential treatment does not disadvantage other

clients. C. Comply with this request, since the fund is such a large and important client. D. Comply with this request, since the fund is paying for the preferential treatment with the higher

fees.

Analysis:

This case relates to Standard III(B) – Fair Dealing which states that CFA Institute members and candidates “must deal fairly and objective will all clients when providing investment analysis, making investment recommendations, and taking investment action.” Treating clients “fairly” means not favoring one client over another or discriminating against clients when disseminating investment recommendations or actions. Differentiated service to clients, in the form of personal, specialized, or in-depth service to clients who are willing to pay for premium service is acceptable under the standard. However, different levels of service cannot disadvantage or negatively affect other clients and should be disclosed and available to all clients and potential clients. In this case, providing “enhanced service” to the pension fund is acceptable so long as the preferential treatment does not disadvantage other clients and their ability to receive enhanced service along with the pension fund has been fully disclosed to them. Two aspects of the request – providing advanced recommendations to the fund and giving the fund priority position for initial public offerings – would disadvantage other clients by systematically benefiting the pension fund at the expense of other clients. Fair dealing dictates that recommendations are distributed in such a manner that all clients have a fair opportunity to act on the recommendation. When making investments in new offerings, the opportunities should be distributed to all clients for who the investments are appropriate. Korloff may provide preferential treatment (reflecting the amount and level of fees paid by the pension fund) in the form of supplemental research and daily contact to the pension fund without disadvantaging other clients. Answer B is the best response.

CFA Institute Loyalty Prudence, and Care Scenario

Barry Van Wagenen manages the portfolios of high net worth clients. He completes an individualized

investment policy statement (IPS) for each client when opening their account. He then develops a

personal asset allocation formula based on each client’s risk tolerance, financial goals, etc. Over the past

two days, the domestic and global equity securities markets tumble over 6%. Fearing a continued drop

in the markets, Van Waganen liquidates his personal investments and moves to cash until the financial

markets stabilize. However, he keeps his clients’ portfolios fully invested pursuant to the directives in

their IPS. Van Wagenen’s actions are:

A. Unacceptable, as he is trading ahead of his clients for his personal account.

B. Unacceptable, as his personal investment decisions do not match the investment

recommendations he has made to his clients.

C. Unacceptable, as he is not acting in a diligent and reasonable manner by leaving his clients

assets fully invested in a rapidly declining securities market.

D. Acceptable, as he is following his client’s directives, as detailed in their IPS, by keeping them

fully invested.

Analysis

The CFA Institute Ethical Decision-Making framework (link) provides guidance to investment

professionals facing ethical dilemmas. The framework calls for identifying the ethical principle at issue,

to whom a duty is owed, the relevant facts, and whether there is conflict of interest to assist in choosing

the appropriate course of conduct. In this case, we need more facts before we can properly analyze

whether Van Wagenen’s actions are acceptable. Specifically, what level of investment discretion has Van

Wagenen’s clients given him regarding investment decisions and whether the client IPSs address how

investment decisions are to be made in the face of rapidly changing market conditions. If Van Wagenen

has full investment discretion, failing to adjust his client’s portfolio in a timely manner may breach Van

Wagenen’s duty to act with diligence and with a reasonable basis (CFA Institute Standard V(A)) and in

violation of his duty of Loyalty Prudence and Care (CFA Institute Standard III(A)) to his clients. Similarly, if

the IPS states that, in the event of a significant market downturn, Van Wagenen has the authority to

alter the agreed upon asset allocation formula prior to formally revising the IPS that would also be a

strong indicator for Van Wagenen to take action. Under those circumstances choice C would be the best

answer. However, if Van Wagenen has limited discretion or the IPS was silent about “emergency”

powers to make changes in the portfolio, Van Wagenen’s hands may be tied. (Choice D) However, it is

not clear whether Van Wagenen acted diligently to attempt to contact his clients in the face of volatile

markets to determine any changes to their investment instructions. CFA Institute Standard VI(B)—

Priority of Transactions states that investment transactions of clients must have priority over personal

transactions. This does not require an investment professionals personal investments match those of his

clients as there may be a difference in their risk tolerances, financial goals, etc. between and adviser and

his/her clients. (Choice B) It is also not clear that Van Wagenen is “front running” his client accounts as

the price of the securities at issue may not be affected by the trades on his personal account (Choice A).

Facts not based on a particular case but reflective of current market volatility.

CFA Institute Misrepresentation Scenario

Foss is an institutional money manager specializing in a quantitative investment strategy. He developed

the code for a quantitative model and uses it exclusively as the investment decision-making tool for

client accounts. Foss heavily markets his “comprehensive and exclusive” model to clients and

perspective clients as being an effective tool to manage risk. After using the model for several years,

Foss discovers an error that inadvertently eliminated one of the key components for managing risk,

leading to underperformance due to industry overexposure. During that time, several clients raised

questions about their portfolio performance which Foss attributed to market volatility. Foss revises the

model to address the error and begins to promote his “new and improved exclusive comprehensive

quantitative model.” Foss’s conduct is:

A. Unacceptable, as the original model resulted in underperformance.

B. Acceptable, as factors in quantitative models are proprietary and need not be disclosed.

C. Unacceptable, as he failed to disclose the error in the model and its impact on client

performance.

D. Acceptable, as Foss corrected the error and uses a new model.

Analysis

This case involves CFA Institute Standard I(C) – Misrepresentation which states that CFA Institute

Members and Candidates must not knowingly make any misrepresentation relating to investment

analysis, recommendations, or actions. A misrepresentation is any untrue statement or omission of fact

that is otherwise false or misleading. While investment professionals are not required to divulge the

proprietary elements of their investment decision-making model, they are prohibited from making

statements about the model that are not true. In this case, Foss claimed that his “comprehensive

model” would effectively manage risk while at the same time, because of an error, the model omitted a

key factor for managing risk. Foss also made misrepresentations to clients by failing to disclose the error

and its impact on performance and attributing the model’s underperformance due to market volatility

rather than the error. Correcting the error and using a new model does not address the

misrepresentations. Underperforming the market or benchmark is not necessarily of indicative unethical

behavior. However, the fact that the original model did not effectively manage risk and led to

underperformance also may lead to a violation of the CFA Institute Standard -- Diligence and Reasonable

Basis requiring CFA members and candidates to exercise diligence and thoroughness in analyzing

investments and taking investment action. Choice C is the best response. This case is based on a US SEC

enforcement action.

4/20/2018 COMPLY-When tweeting makes discipline easy for U.S. regulators

https://www.reuters.com/article/sec-twitter/comply-when-tweeting-makes-discipline-easy-for-u-s-regulators-idUSL2N0L912T20140207 1/5

Myanmar Energy & Environment Brexit North Korea Charged: The Future of Autos Future of Money

FUNDS NEWS

FEBRUARY 7, 2014 / 1 :15 PM / 4 YEARS AGO

COMPLY-When tweeting makes discipline easy for U.S.regulators

Suzanne Barlyn

Feb 7 (Reuters) - U.S. financial advisers have nowhere to hide when they break the industry’sadvertising rules while chatting publicly on social media sites such as Twitter and LinkedIn.

In an era when simply posting a stock tip can get a broker fired, U.S. securities regulators haverepeatedly warned that they are keeping a watchful eye on the social media practices ofadvisers and their firms.

Some financial professionals break the rules anyway.

A case in point: The U.S. Securities and Exchange Commission levied a $100,000 fine againstadviser Mark Grimaldi and his firm last week for misleading investors in two tweets about hisinvesting strategy’s performance. The tweets claiming he “DOUBLED the S&P 500 the last 10years” took liberties with the performance claims to boost his portfolio’s allure, the SEC said.

While the promotional appeal of social media is understandable, the risks of clicking that“post” button can be high. Regulators typically view advisers’ posts as advertising ormarketing, areas that are subject to many rules.

These rules come from the SEC and states, which oversee investment advisers, and theFinancial Industry Regulatory Authority, the watchdog over brokerages and stockbrokers.

4/20/2018 COMPLY-When tweeting makes discipline easy for U.S. regulators

https://www.reuters.com/article/sec-twitter/comply-when-tweeting-makes-discipline-easy-for-u-s-regulators-idUSL2N0L912T20140207 2/5

Posts that run afoul of the rules can lead to fines, suspensions and bad publicity even if theviolation is inadvertent.

Moreover, social media posts, unlike printed brochures, are easy to find. For example,regulators can search Twitter for key terms such as “guarantee” or “promise” to catchpotential violations, said April Rudin, president of the Rudin Group financial servicesmarketing firm in Fort Lee, New Jersey.

To be sure, the largest securities firms have strict policies that range from banning advisersfrom using social media to restricting them to using only pre-approved content. These firmsalso typically hire outside services to monitor advisers’ social media use.

Smaller advisory firms and independent brokerages, however, are more likely to get in troublebecause many do not have a social media plan, compliance professionals say.

A good plan should include everything from guidance on what advisers should post to how thefirm will meet other mandates, such as monitoring and saving those communications.

PAST PERFORMANCE

The SEC’s $100,000 fine on Jan. 30 against Grimaldi and Navigator Money Management Inc,his Wappingers Falls, New York, investment advisory business, shows how a couple of tweetscan go wrong.

Grimaldi and the firm used newsletters and Twitter in 2011 to plug the past performance of amutual fund he managed, Sector Rotation, the SEC said. The agency focused in part on twotweets that claimed credit for the success of a performance model during a 10-year period, butGrimaldi and the firm were not involved in the strategy for part of that time.

Navigator must now display a long disclosure about the SEC’s case on its website and ramp upits marketing controls.

4/20/2018 COMPLY-When tweeting makes discipline easy for U.S. regulators

https://www.reuters.com/article/sec-twitter/comply-when-tweeting-makes-discipline-easy-for-u-s-regulators-idUSL2N0L912T20140207 3/5

Grimaldi and Navigator, in which he owns a majority interest, neither admitted nor denied theSEC’s findings, the SEC said. Grimaldi did not return a call requesting comment.

Other mistakes can also land advisers in the hot seat. FINRA, for example, zeroed in on astatement from former broker John Gourdin’s LinkedIn profile that said he worked “to createtax-advantaged, wealth building and protection plans” for businesses and individuals,”according to a regulatory document.

The statement appeared in a LinkedIn summary that was not balanced and did not provide asound basis for the public to evaluate the claims, FINRA said in a Dec. 2 settlement. That andother statements Gourdin made on websites that his firm did not approve led to a $10,000 civilfine and 60-day suspension, the regulator said.

Gourdin, who is based in Maryland, told Reuters that he was using the profile to promote hisinsurance business, not his brokerage business. He has since left the securities industry butcontinues to sell insurance.

AVOID TROUBLE

To avoid regulatory hassles, advisers at firms that already have social media policies in placeshould stick to those rules.

Under a firm’s policy, for example, posting a stock tip could lead to dismissal. The firm wouldthen have to disclose the adviser’s termination to FINRA, which may then discipline theadviser, compliance professionals say.

Advisers who run smaller firms that do not have a social media plan need one, said Rudin, themarketing professional.

4/20/2018 COMPLY-When tweeting makes discipline easy for U.S. regulators

https://www.reuters.com/article/sec-twitter/comply-when-tweeting-makes-discipline-easy-for-u-s-regulators-idUSL2N0L912T20140207 4/5

Compliance performance rules are particularly tricky and may be so complex that requireddisclosures cannot fit into 140 Twitter characters.

Refraining from incessant posting can also limit problems.

Rudin tells clients to write posts in advance for sites such as Twitter and Facebook and pegthem to seasonal events, such as tax planning, or news about their practices.

Helen Modly, a wealth manager at Focus Wealth Management Ltd in Middleburg, Virginia,tweets occasionally about articles she finds interesting, and advisers at her firm never use theirpersonal Facebook pages to discuss work.

Nor do their individual LinkedIn pages promote specific products or strategies. Above all,Modly said, they do not mention the one word that is likely to get advisers in trouble: “Wedon’t use the word, ‘guarantee.’”

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4/20/2018 Financial Advisors: 15 Tips To Use Social Media (Compliantly)

https://www.forbes.com/sites/joannabelbey/2017/01/03/financial-advisors-15-tips-to-use-social-media-compliantly/#4e0fd7d975d1 1/9

ADVISOR NETWORK #CuttingEdge

Jan 3, 2017, 06:32am • 10,737 views

Joanna BelbeyContributor

TWEET THIS

According to a recent survey, 85% of

financial advisors use social media for

business. 80% of these “social advisors”

gained new clients resulting in nearly $5

million in average asset gain directly

attributable to social media use. 85% also

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Financial Advisors:15 Tips To Use SocialMedia (Compliantly)

Are you ready to step off the sidelines and become a "socialadvisor" to build your business?

Financial Advisors can use social media to grow theirbusiness while staying compliant with the rules andregulations of the financial industry.

Shutterstock [+]

BETA

4/20/2018 Financial Advisors: 15 Tips To Use Social Media (Compliantly)

https://www.forbes.com/sites/joannabelbey/2017/01/03/financial-advisors-15-tips-to-use-social-media-compliantly/#4e0fd7d975d1 2/9

said that social media shortened the selling

cycle. For these advisors, social media is no

longer an option, but a proven tool used to

gain new business and to build closer

relationships with clients.

Are you ready to step off the sidelines and

become a "social advisor" to build your

business? Here are 15 tips help you use

social media effectively, while complying

with the rules and regulations in the

financial industry:

1. Understand your company’s

social media policy. Most firms at

this point have moved beyond “no” to

allowing their associated persons to

use social media in some way. Read

and make sure you understand your

corporate policy. Contact your

compliance department with

questions. Speak with colleagues.

Participate in any training that may

be available at your firm or online.

2. Define your audience. Many

financial advisors specialize. Do you

target high tech founders? Healthcare

professionals? Business owners? High

net worth multi-generational

families? Select the social media

platform used by your clients so you

can communicate in the manner your

clients want to communicate.

BETA

4/20/2018 Financial Advisors: 15 Tips To Use Social Media (Compliantly)

https://www.forbes.com/sites/joannabelbey/2017/01/03/financial-advisors-15-tips-to-use-social-media-compliantly/#4e0fd7d975d1 3/9

3. Define your personal brand. This

is often the hardest concept to grasp

for newcomers to social media. This is

simply a consistent reflection of who

you are. Define your special talents

and areas of expertise that help your

clients succeed. And importantly,

reveal your personal interests and

show your authentic self. Whether

you are a rabid Bruce Springsteen

fan, competitive bicycle racer, or

volunteer for a good cause, include

that too. Be careful though. It’s best

to avoid politics, religion or

controversial opinions to avoid

excluding possible clients that hold a

different view.

4. Invest in a professional photo:

The most important element of a

social media profile is your photo.

Unless your firm requires photos

taken by the firm’s corporate

photographer, make the investment

and hire a professional photographer.

Profiles without photos are met with

skepticism, suspicion and generally

ignored. Your profile photo should

reflect how you look when meeting

with clients, not some great photo of

you happily drinking Mai Tais on the

beach with someone’s arm draped

over your shoulder.

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5. Select a social media platform.

Select one platform initially and

create an account to use for business.

LinkedIn is a favorite place to start

for many financial advisors, but some

also use Twitter, Facebook,

Instagram, or even Snap. It goes back

to identifying your clients and

prospects and being where they are.

Once you become familiar with one

platform, you can experiment with

others.

6. Create a social media profile

compliantly. Based on your firm’s

social media policy, you may find that

your firm has specific requirements

for your social media profile. Many

firms require setting up the account

with your business email for

recordkeeping purposes. Or when

using LinkedIn as an example, firms

typically prohibit

“Recommendation’s” and “Skills and

Endorsements” to avoid the

appearance of a testimonial. If so, and

these already appear on your profile,

you may be asked to “hide” them. For

consistent firm branding, you may be

instructed to include a pre-approved

paragraph that describes your firm.

Once your profile is complete, your

firm may require that it is reviewed

by a registered principle of the firm

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before it is used for business in

keeping with advertising rules of the

industry.

7. Build your network. Once your

profile is set up and approved by

compliance, reach out to people you

know and invite them to become a

connection on LinkedIn. Personally

written notes are key, so don’t click

on “Connect” within “Who’s Viewed

Your Profile”, or use the mobile app

to make a connection. Although quick

and easy, those invitations will be

sent with a standard message.

Instead, carefully craft introductions

that remind people of how you know

them, how you could provide value

and perhaps mention your mutual

connections. Initially, reach out to

people you know and like from

various stages of your life. For new

LinkedIn users, strive for 250

connections. 500 is better.

8. Listen and learn. Before you take

any actions on social media, watch

what others are doing. Pay attention

to what you like and don’t like. Look

at your competitors’, colleagues’, and

friends’ posts. If you see a personal

connection with a "life event" such as

a birth or graduation of a child, a

move, a promotion, or perhaps

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retirement, consider reaching out by

phone to offer a genuine

congratulations and to catch up.

There are many stories of financial

advisers who used a combination of

social media and the phone to gain

new clients.

9. Engage. Once you feel comfortable,

begin to join the conversation to

provide value and be helpful. Social

media is a two way street. Be

generous with information and

helpful. Depending on your firm’s

policy, you may elect to add a

comment, “like” or “share” your

connections’ content. Some firms

allow this, others don’t.

10. Share useful content. Many

financial services firms have libraries

of articles that have already been pre-

approved by compliance that you may

share on social media. Share the

content that matches your personal

brand, demonstrates your specific

expertise and is of interest to your

clients / followers. Be consistent.

11. Be authentic. If allowed by your

firm, personalize the message of

content from the library so that it’s in

your own voice. If permitted, also find

and share additional articles that will

be of interest to your clients and

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prospects. To make this less time

consuming, you can set up alerts on

Google for topics of interest. Blogging

is also an effective (albeit time

consuming) way to demonstrate that

you are an authority in your field. As

with everything, check your firm’s

policy before proceeding.

12. Show your personal side: When

posting content, remember the 80/20

rule. Consider posting 80% business

content and 20% personal content

that reflects your brand. Remember,

we do business with people we like

and who share our passions.

13. Use social media for research

and prospecting. If you have a

premium account with LinkedIn, you

can find, research and connect with

almost anyone, anywhere, depending

on the number and type of your 1

degree connections. Conduct searches

based on your preferred customer

profile. Select from years of

experience, function, seniority level,

company size and others. You can

also search by personal interests that

you may share. Limit your search to

2 degree connections so you can ask

for a referral if necessary. Conduct

research and craft personalized

introductions that convey why people

st

nd

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may want to connect to you. If they

agree, thank them with another note.

Your firm may have templated

communications for this purpose. Use

the tagging feature on LinkedIn to

categorize these connections for

easier ongoing follow-up. Some

financial advisors immediately ask for

a meeting at this point. However, you

may find it more effective to watch

and engage and get to know someone

a bit first. Share an article or

something useful, so they can see

where you add value. Use social

media to demonstrate expertise and

build trust over time.

14. Avoid pitfalls. If you are allowed to

venture past the library of

preapproved content at your firm, be

careful to both stay compliant and to

protect your personal brand. Be sure

to read an article before you share it.

In the world of “click bait”, the

headline may be vastly different than

the article itself. Avoid “fake news” by

only sharing content from reputable

outlets such as well-known

newspapers, magazines and

networks. Remember to actually

include the links to the article and

make sure they are working. Make it a

habit to be active on social media to

avoid creating a “ghost town”.

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15. No pitching. And finally, no selling

products. No one likes being pitched

on social media and it may violate

industry rules around suitability.

Instead, move the conversation

towards your traditional channels of

one-to-one communications, such as

email and phone, when it becomes

more business oriented.

By following some or all of these tips,

Financial Advisors can use social media to

grow their business while staying compliant

with the rules and regulations of the

financial industry. ●

Follow Joanna on Twitter @Belbey

ABOUT THE AUTHOR

Joanna BelbeyContributor Follow

I counsel regulated �rms on using social media and

other forms of electronic communications

effectively while complying with industry rules and

regulations in �nancial services, healthcare and

other regulated industries. As a Subject Matter

Expert for Compliance, I am both... Read More

i

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4/20/2018 Former LPL financial advisor Ross Gerber tweets about Trump | Financial Planning

https://www.financial-planning.com/news/lpl-loses-financial-advisor-ross-gerber 1/7

Advisor's Trump tweets prompt right-wing backlash afterexit from LPL

By Tobias SalingerPublished March 19 2018, 12∶50pm EDT

More in Going independent, Independent advisors, RIAs, Social media, Digital marketing, Technology, Compliance, RossGerber, Donald Trump, LPL Financial, FINRA

An advisor, finally unshackled from what he criticized as onerous rules around social media,

found himself slammed when he exercised his newfound freedom.

Gerber Kawasaki Wealth and Investment Management CEO Ross Gerber left LPL Financial in

December, frustrated by onerous compliance rules around press appearances and FINRA

mandates on posts.

Then last week, Gerber, who has nearly 49,000 Twitter followers, tweeted about President

Trump and quickly faced a right-wing backlash. He admits he “made the mistake of being

overly aggressive” in the now-deleted tweets that wound up on right-wing blogger Mike

Cernovich’s website.

“If you are hosting or attending the Trump fundraiser in L.A. we will identify who you are to the

media and public. We will boycott your business," Gerber tweeted March 11, adding that

“Trump is the devil.” A subsequent tweet urged his followers to “get everyone out on the streets

and stop his motorcade.”

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The firm’s ratings on Google have turned into a mixture of glowing reviews and scathing ones

following Cernovich’s post. “This man called people scumbags for their political beliefs, and

said he would destroy them for supporting the POTUS,” one commenter wrote. “This guy will

never see my money.”

The episode illustrates the risk when advisors post on social media, Gerber says. The Santa

Monica, California-based advisor had severed his ties with LPL under his firm’s new dual

structure, in part because of how he sees independent broker-dealers such as LPL as tasked

with enforcing FINRA’s overly vague regulations.

Gerber set up a fully independent RIA and a hybrid firm under LPL, he says. By his account,

LPL’s strict oversight of press interviews and social media posts was hindering the firm’s

growth, and the two-way approach allows the firm’s 19 advisors to choose between the two

affiliations.

Hybrid RIAs account for more than a third of LPL’s advisors, with roughly 5,200, and over 40%

of its advisory assets, with $113 billion. Gerber’s practice has showed impressive expansion,

4/20/2018 Former LPL financial advisor Ross Gerber tweets about Trump | Financial Planning

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jumping from $175 million in assets under management in 2013 to $750 million in March

without any M&A, he says.

LPL’s approach to Gerber’s frequent media interviews and social posts changed when CEO

Dan Arnold took over last year, he says. The Department of Labor fiduciary rule also “started

something that won’t end, which is the push for lower fees and the push for fiduciary advice,”

according to Gerber.

“They come in and tell me how I’m supposed to market my business because I sell a few 529

plans through them?” he says. “The broker-dealers need to adapt, and they’re not able to

because of FINRA. I like LPL but I don’t like the fact that their compliance department felt

compelled to be draconian with the rules after five years of giving me a pass.”

Advisors on the move: 23 jumps, $5.6B in AUMAmong recent career changes, Merrill Lynch lost brokers managing $2.2 billion to rival J.P. Morgan

Securities.

LPL spokesman Jeff Mochal says no policies about advisors’ compliance obligations or

responsibilities changed when Arnold succeeded Mark Casady last January.

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4/20/2018 Former LPL financial advisor Ross Gerber tweets about Trump | Financial Planning

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“We’re proud to partner with our advisors on solutions that help advance their marketing and

social media efforts, while also ensuring compliance to practical regulations designed to

protect investors from potentially incomplete or misleading marketing,” Mochal said in an

email. “It’s a unique challenge on platforms like Twitter, but thousands of LPL advisors are on

that platform daily without issue.”

A spokeswoman from FINRA declined to respond to Gerber’s view, referring questions to a

section of FINRA’s website about its social media and digital communications policies. The

guidelines require firms to supervise and retain business-related posts while upholding “fair

and balanced communications.”

“Social media may be a new medium, but FINRA's rules on communicating with the public are

still applicable,” according to the website.

Ross Gerber is the co-founder of Santa Monica, California-based Gerber KawasakiWealth and Investment Management.

Gerber and Danilo Kawasaki, the owners of the firm, launched the RIA in 2010. At the end of

2017, the practice opened a satellite office at a WeWork location in San Francisco with an eye

toward opening more in the future, Gerber says. He dropped LPL on Dec. 22 after five years,

according to FINRA BrokerCheck.

In the March 12 post about Gerber, Cernovich used the headline “Fund manager Ross Gerber

makes disturbing threats against Trump and Trump's supporters.” A commenter on the site

4/20/2018 Former LPL financial advisor Ross Gerber tweets about Trump | Financial Planning

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noted that the firm was “getting hammered” with negative reviews on Google after it went live.

“I received no reply to an email asking whether or not an animus towards Trump supporters is

a material fact that should be disclosed to existing Gerber Kawasaki clients and the investing

public,” Cernovich wrote in the post.

No clients have called Gerber about his tweets and the response to them, he says. Gerber

refers to himself as a “prominent Democrat,” but he says that calls from Cernovich’s readers

and alt-right bots died off day or so after the post.

“You’ve got to be careful what you say on Twitter,” Gerber says. “It was my fault. I’m a political

guy, and I was too aggressive and they attacked back.”

LPL’s compliance team never restricted him from stating political views, but they did instruct

him to be careful not to be construed as recommending particular products, according to

Gerber. He points out that advisors who are fiduciaries don’t receive commissions for selling

products in the first place.

Previously, Gerber says, LPL had taken more of a hands-off approach towards his media

appearances and social media as a representative of his RIA rather than LPL. He predicts most

of his firm’s advisors will join the independent RIA in an effort to boost business through

unfettered posts and appearances.

“There’s no need to have a broker-dealer anymore. That’s really what it came down to,” says

Gerber. “They didn’t want us to post anything on social media and I was like, ‘Dude, that’s not

how it works.’”

Tobias Salinger is an associate editor for Financial Planning, On Wall Street & Bank Investment

Consultant.

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