financial institutions and social media

Melanie Taylor Vice President

October 2012

Financial Institutions and Social Media

2 HOW FINANCIAL INSTITUTIONS CAN USE SOCIAL MEDIA OCTOBER 2012

Table of Contents

The Purpose of this POV 3

What are the FINRA regulations and what do they mean? 4

Third-Party Moderation Partners 6

How are financial institutions currently using social media? 8

Recommendations for activating social networks for financial institutions 12

Resources 13

About Social@Ogilvy 14


The Purpose of this POV

This POV is here to provide guidance on how financial and investment management institutions can use

social media to drive business relationships in compliance with strict government regulations.

Summary

Like other industries, financial firms have been eager to leverage the popularity of social media to service their business. However, to ensure that investors are protected from false or misleading claims and representations, and firms are able to effectively and appropriately supervise their associated persons’ participation in social media sites, the financial industry is subject to strict communications

rules and regulations from state regulators, the SEC and FINRA. These rules require all activity related to the business to be recorded and archived, and requires the firm to create defined policies and procedures.

There are several software companies that have developed archival and compliance solutions for financial institutions. We evaluate some leading providers here, as well as some guidance on choosing a provider. Many banks and investment management firms have already created a social media presence with different objectives and employee roll-out plans. We can learn from their experience and help firms create the best plan for their organization.


What are the FINRA regulations and what do they mean?

Based on FINRA guidelines from 2010 and 2011, recent rulings by the SEC and a state regulator’s deficiency letter obtained by Thomson Reuters in May 2012, we have compiled the following summary of what the rules mean for

a financial services firm that wants to participate in social media. Although these mostly apply to investment firms and brokerages, retail banks that sell securities also must comply with these rules.

1 Record-keeping. Every firm that intends to communicate, or permit its associated persons to communicate, through social media sites must first ensure that it can retain records of those communications. Firms cannot delete, and must archive, all social media activities. There is software available to help with that, discussed within.

2 Suitability (recommendations to customers) responsibilities. NASD Rule 2310 states that the person receiving an investment recommendation must be suitable for it. That means that an untargeted social media post or communication that goes to a large group (like LinkedIn connections), must be suitable for all of them. An important factor in this regard is whether a particular communication from a broker-dealer to a customer reasonably would be viewed as a “call to action.” For example, some states have ruled that “Liking” a brand on Facebook can be seen as a recommendation.


3 Pre-approval of Content. All static content (such as Facebook and LinkedIn profiles) requires documented pre-approval before posting. A static posting is deemed an “advertisement” under NASD Rule 2210 and therefore requires a registered principal to approve the posting prior to use. Interactive content (the stream of updates to Twitter, LinkedIn, Facebook wall content and other networks) doesn’t need vetting, but must be supervised — sampled regularly after posting, for compliance violations. These rules apply to all content of a business nature, whether from an official company account or an employee’s own personal account.

4 Supervision of social media sites. Firms are required to supervise interactive communication on social media sites and adopt policies to stay in compliance with FINRA guidelines. For example, firms may adopt procedures that require principal review of some or all interactive electronic communications prior to use, or may adopt various methods of post-use review, including sampling and lexicon-based search methodologies.

5 Third-party posts. Social media posts from third parties are not considered communications from a firm unless the firm has endorsed or is involved in the preparation of the content. This means that firms are not responsible for what others say or claim about their products and services, unless they actively involve themselves with the third-party content. Under certain circumstances, however, third-party posts may become attributable to the firm. Whether third-party content is attributable to a firm depends on whether the firm has (1) involved itself in the preparation of the content or (2) explicitly or implicitly endorsed or approved the content.


In order to maintain compliance with all of these rules and regulations (archives, moderation, approved posts), savvy financial

services firms are partnering with one of several Web-based software providers to help automate these required processes. Some vendors support the archiving process, others focus on compliance, and a few do both (most of these platforms work through proxy redirect, so will only work when employees access these sites from the office – though some are expanding to include coverage from mobile devices, as well.) Choosing a provider should be based on several things:

1 What types of archiving and compliance software is your organization already using for online communications?

2 How many employees need access to the software?

3 What platforms do you need to archive?

4 Do you also need content library capabilities?

Following is a summary of some top providers.

Third-Party Moderation Partners

Compliance and Archiving

Works exclusively with financial companies, which ensures tight compliance with all new rulings. They also archive all social media activity and provide a pre- and post-approval support system. There is an additional social media relationship offering that tracks engagement metrics.


Archiving Only

Offers a full service solution for financial firms that need archiving, monitoring, maintaining and surveillance of the activities on social media. Arkovi’s compliance tools also enable the capture, policy enforcement and pre-review of LI, TW, and FB with automatic export to our email archiving partners, for archiving, supervision, eDiscovery and audits.


Compliance only

A compliance and analytics service provider. The analytics module allows a user to do a deep dive into all social platforms, to determine overall reach and strength of individual posts. Can set up pre-approved content, and there is a lexicon library for original posts. Rather than archive data, they push the records to a firm’s content management platform. Plus, they have an Android mobile application.


Captures and maintains posts for the five key platforms. Clients can also opt for content libraries, and get support from any device or interface. They can capture advisor updates for post-approval. Hearsay can either retain the data it captures or push it out to a client’s system. Uniquely allows clients to choose features a la carte.


Archiving Only

Smarsh provides compliance and archiving tools similar to other platforms. The difference for them is security. They own and maintain all their own servers that archive a company’s data. They also support posts for Salesforce Chatter, Jive and Yammer, in addition to Facebook, Linkedin, and Twitter.


How are financial institutions currently using social media?

Many financial services firms have tested social media activations within the FINRA guidelines, with some

success. There have been two approaches that firms have embraced: (1) brand-led and (2) employee-led. And many firms are testing the waters of both. Because brokers/advisors are the sales generators and often the face of a firm, activating their networks can be more beneficial than a corporate-voiced social platform. However, having multiple touch points opens up exposure to risk and compliance issues, and therefore, may not be the best way of beginning a social media program for a firm. Although all profiles on Facebook, LinkedIn and Twitter are required to be

moderated and archived by financial firms, and posts must be pre-approved, often in the form of a content library for employees to choose from, some firms are able to attribute some business success from social media engagement.

Morgan Stanley Smith Barney has been slowly rolling out access to Twitter and LinkedIn, using the Socialware platform to provide pre-approved posts. Many pre-approved posts include links to original content found on the corporate website, or public content from other financial news provider sites. All brokers use the letters MSSB in their Twitter handle,

branded wallpaper and link to their profile pages on the Morgan Stanley website. They use previously approved language on their LinkedIn pages after a personal summary.


The consensus so far in Morgan Stanley is that Twitter is helping brokers stay connected to their clients with newsworthy and informative updates, but they are having more business luck with LinkedIn ,where one agent reported bringing in over $10MM worth of business, due to connections leading to conversations. This is supported with research done by LinkedIn, showing more than 60% of financial consultants were using the platform to find new prospects.

Like Morgan Stanley, Goldman Sachs has steered clear of Facebook activity on behalf of the brand. This is likely due to the challenge of managing negative comments posted to the wall. Goldman Sachs has instead branched out to use YouTube to reach their target audience on a social platform. However, they do not allow comments on their videos, therefore eliminating the social engagement. The videos do remain shareable. Goldman Sachs also uses Twitter (they launched in May 2012) and a company page on LinkedIn. Their social media goals are more about building thought leadership and brand visibility (based on their Social Media Manager job posting).

NO 38%

YES 62%

42%

20%

Corresponding gain in assets under management from new clients

Less than $500K

Source: LinkedIn, 2012

$500 to $999

$1M to $4.9M

32%More than $5M

Have you gained new clients through engagement on LinkedIn?

20%

12%


One investment brokerage that maintains an active presence on Facebook is Vanguard, which was the first brand to lead the way in social media in 2010, just as the SEC and FINRA released their guidelines. However, their Facebook page does have some negative comments on the small section of the Timeline designated for external wall posts. A Vanguard representative usually responds with a comment to help solve the problems regarding issues with funds or process, but specific investment complaints are left without a response.

Several banks, like Deutsche Bank and Wells Fargo, also engage with social media. Wells Fargo has allowed some mortgage bankers to have Facebook pages to communicate with homeowners. Other banks, like Deutshe Bank, have identified leaders to be the voice of the brand in social media. All of these selected people are using pre-approved posts, and following strict social media policies per the FINRA guidelines.


Social@Ogilvy has worked with Citizen’s Bank to create those pre-approved posts that the compliance team approves. We used a risk response matrix to identify strategic opportunities for the brand to join the conversation, and defined the best ways to do that.

Another option to engage socially without using social platforms like Twitter or LinkedIn is to create an Influencer Network to help extend the reach of a message online, or to provide feedback to the financial institution. Social@Ogilvy helped TDAmeritrade do just that when they were launching their Investools products. Using our Influencer Relationship Management process, we created a network of online influencers that actively blogged about the financial industry, to help TDAmeritrade create their online tools offering.


We believe that there is a huge opportunity for financial services to use social media to help grow

their businesses through a strategic use of engagement tactics, while remaining within all government regulations. The following are key steps to creating a social presence for your brand:

1 Develop detailed enterprise-wide social media policies and guidelines. Then, develop a training program to ensure that all employees are aware of the policies in place and the reasons why.

2 Choose an archiving partner to meet FINRA and SEC retention guidelines for eDiscovery. Social@Ogilvy can help you choose the best one for your social media plans and your organization size.

3 Develop a social media strategy with defined and measurable goals to demonstrate the impact on the business; it’s not just about launching a Twitter page.

4 Create a pre-approved content library to activate in social channels (if applicable). Then, develop a process to keep it relevant with timely updates.

5 Support the program with a detailed moderation plan to ensure compliance for all employees across all platforms.

Want to get started immediately? Contact your Ogilvy partner representative for additional details, project management schedules and executing a scope of work.

Recommendations for activating social networks for financial institutions


www.socialturns.com

Harvard Business Review: Online, Social Media Compliance Isn’t Fun, But It’s Necessary R. Holmes, Aug 23, 2012 http://blogs.hbr.org/cs/2012/08/social_media_compliance_isnt.html

BankTech.com, Creating a FINRA-Friendly Social Media Plan, S. Opplinger, Mar 27, 2012 http://www.banktech.com/channels/creating-a-finra-friendly-social-media-p/232700252

http://finra.org http://www.finra.org/Industry/Regulation/Notices/2010/P120760 http://www.finra.org/web/groups/industry/@ip/@reg/@notice/documents/notices/p120779.pdf http://www.finra.org/web/groups/industry/@ip/@reg/@notice/documents/notices/p124186.pdf

Thomson Reuters Online: State regulator’s deficiency letter offers clues for social-media policies, J. Wallace, May 29, 2012 http://newsandinsight.thomsonreuters.com/Securities/Insight/2012/05_-_May/State_regulator_s_deficiency_letter_offers_clues_for_social-media_policies/

Dealbook/New York Times Online, On Wall St., Keeping a Tight Rein on Twitter, W. Alden, Mar 21, 2012 http://dealbook.nytimes.com/2012/03/21/on-wall-st-keeping-a-tight-rein-on-twitter/

FTI Consulting, http://www.fticonsulting.com/global2/media/collateral/united-states/financial-advisors-use-of-social-media-moves-from-early-adoption-to-mainstream.pdf

Fourth Source: Why the financial sector has turned its back on social media marketing, A. Cooper, Aug 2, 2012 http://www.fourthsource.com/social-media/why-financial-sector-turned-back-social-media-marketing-10018

WealthManagement.com, Got the Social Media Spins? Help Is On The Way, L. Barack, Feb 2, 2012 http://wealthmanagement.com/resources-amp-community/got-social-media-spins-help-way

http://www.securitiesarbitrationlawblog.com/?p=60

Resources

About Social@Ogilvy

Social@Ogilvy is the largest social media marketing communications network in the world. Named 2011 Global Digital/Social Consultancy of the Year by The Holmes Report, the practice

leverages social media expertise across all Ogilvy & Mather disciplines, offering an extensive list of services within the foundational business solutions – Listening and Analytics; Social Business Solutions; Social Media Marketing and Communications; Social Shopping; Social CRM; Social Care; and Conversation Impact.

For more information, visit social.ogilvy.com and connect with us at www.facebook.com/socialogilvy, www.twitter.com/socialogilvy, www.slideshare.com/socialogilvy.

Contact: [email protected] and [email protected]

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