As broker-dealers consider letting registered representatives use social media for business purposes, a well-developed compliance program in this area is essential. Whether the media is something like a blog, Facebook, Linkedin, Twitter, or something else, firms must remember that they have an obligation to reasonably supervise its use. This means that the firm must develop written procedures that include details for how social media may be used and by whom (and maybe what specific tools or platforms can be used), for what use approvals are needed, how and when approvals will be granted, and how the firm will continually supervise to enforce its procedures, among other things.
Importantly, firms must also have in place systems to archive and store copies of the media used.
Further, they must be careful to make sure that no recommendations to invest in a particular product are made, as it would be very difficult to ensure that the recommendation was suitable for each person receiving it. Firms must also consider whether the information being posted or shared is considered advertising that requires regulatory approval. Finally, firms must enforce its procedures in this area, and document that it is following its procedures.
Even though social media use might require resources to develop and implement procedures, and then to supervise its use, firms may determine that the benefits exceed the costs. Done right, social media can help educate your client base, help build brand awareness, and help a broker and firm keep top of mind awareness with prospects. As your firm develops its social media strategy, don’t forget the importance of needed written procedures and controls, and the need to implement and document compliance with those procedures.