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The Fund Industry Goes Social
June 19, 2013
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Today’s Speakers
• Moderator: Theresa Hamacher, President NICSA
• Panelists:– Kristin Ferguson, Social Media Community Manager
Boston Financial Data Services – Rajib Chanda, Partner
Ropes & Gray– Tim Joyce, Chief Innovation Officer
Telecommunications & Technology, Xerox Commercial Solutions
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Social Media at Boston FinancialKristin Ferguson
Social Media Community ManagerTwitter: @kferguson10 | @BFClients
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Why Social MediaRide the Wave of the Future
Enhance Thought Leadership & Service Education
Engage with Clients Online
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Why Social Media
Goals of the Program
Ride the Wave of the Future
Enhance Thought Leadership & Service Education
Engage with Clients Online
Foster Associate Engagement
Build & Extend Thought Leadership
Cultivate New & Existing Client Relationships
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Social Media Infrastructure
Internal Security Considerations
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Social Media Infrastructure
Choosing Platforms to Reach Our Audience
Internal Security Considerations
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Social Media Infrastructure
Choosing Platforms to Reach Our Audience
Internal Security Considerations
Policies and Procedures
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Content StrategyBoston Financial Content
CommunityThoughtLeadership
CompanyNews
Conferences Marketing
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Content StrategyBoston Financial Content
CommunityThoughtLeadership
CompanyNews
Conferences Marketing
User Generated Content
#BFTurns40 Campaign
Live Tweeting at Conferences
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Content Strategy
Third Party Content
Blog Posts Articles InfoGraphics Videos Rankings or Lists
Boston Financial Content
CommunityThoughtLeadership
CompanyNews
Conferences Marketing
User Generated Content
#BFTurns40 Campaign
Live Tweeting at Conferences
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Early Successes
Where We Are
Growing External Social Media Audience
Increased Internal Collaboration
Good Reception to Social Media Education
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Where We’re Going
E N G A G I N G C L I E N T S @ F A L L E V E N T
Rolling
JULYOut in
EXTERNAL BLOG Coming this Summer
Continuing Social Media Education
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Key Takeaways
Find Your Internal Advocates
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Key Takeaways
Find Your Internal Advocates
Take Time to Lay the Groundwork
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Key Takeaways
Find Your Internal Advocates
Take Time to Lay the Groundwork
Don’t Underestimate the power of Education
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Key Takeaways
Find Your Internal Advocates
Take Time to Lay the Groundwork
Don’t Underestimate the Power of Education
Come From a Place of YES
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Social Media and Regulation in the Financial Services Industry
Rajib ChandaPartner, Ropes & Gray
Twitter: @rchanda
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New Media, Old RulesWhile social media may be the newest forms of communication, it is also important that broker dealers and registered investment advisers maintain compliance with the typical rules governing communications.
Antifraud provision – advertisements may not contain any untrue statements of material fact or be otherwise false or misleading. The SEC will apply a facts and circumstances test to determine if marketing materials violate this provision.
Suitability concerns – the SEC has encouraged firms to prohibit all social media communications that recommend a specific investment product without being certain the recommendation is suitable for every potential member of the audience.
Information security – firms may consider adopting policies and procedures to create appropriate firewalls between sensitive customer information, as well as the firm’s own proprietary information, and any social media site.
Litigation holds – social media communications may be relevant to a litigation matter, and companies should direct litigation hold notices to third-party sites like Facebook and Twitter.
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The Regulatory Landscape FINRA, Regulatory Notice 10-06 (Jan. 2010):
Requires broker-dealers to effectively supervise their use of social media and to minimize the likelihood that false or misleading statements would be distributed.
FINRA, Regulatory Notice 11-39 (Aug. 2011): FINRA responded to questions regarding the application of FINRA rules on recordkeeping,
supervision, and content requirements to social media communications.
SEC, “National Examination Risk Alert: Investment Advisor Use of Social Media” (Jan. 4, 2012): Offered guidance on the implementation of compliance programs, third-party posting, and
recordkeeping.
Two principal issues with guidance: 1. All guidance assumes that branding or advertising is the sole purpose for using social media.2. All guidance ignores a myriad of other issues that firms should consider when adopting social
media compliance policies.
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What’s New? Increased adoption of social media
One survey showed that over 84% of financial advisors in North America use social media for business purposes.
Approximately 65% indicated they use social media every day.
Regulation FD Guidance (Netflix Case)
SEC Alert & FINRA Filings SEC guidance that focuses on content when determining filing obligations.
Various Approaches: Morgan Stanley only allows employees to use a pre-approved library of tweets. Raymond James allows its employees to generate original messages, but these
original messages are screened – typically on the same day, before posting.
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Four Specific Purposes for Adopting Social Media
1. To serve as a newsfeed or an RSS feed about the company (branding or advertising)
2. To form and mobilize communities or groups3. To take advantage of the live search
capabilities enabled by social media platforms
4. To provide efficient and cost effective customer service
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Social Media PitfallsLargest Social Media Pitfall: “Provide and Pray” Practice
Business provides access to the technology, and then prays that a community forms or interactions start occurring among the business’ followers in a way that benefits the business.
Other Pitfalls:“Everyone Else is Doing It”“It’s Hip”“Cheap Advertising”
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“Low-hanging fruit” for RegulatorsRecord-keeping
Broker-dealers and registered investment advisers must retain records of communications that satisfy the firms’ record-keeping obligations under the Securities Exchange Act of 1934, Advisers Act, and FINRA Rule 3110, as applicable.
Broker-dealers must maintain records in a manner that is easily accessible for a period of not less than 3 years.
Registered investment advisers must maintain records in a manner that is easily accessible for a period of not less than 5 years.
If the records are maintained in electronic format, they must be kept in a format that allows for them to be arranged and indexed.
A firm that intends to communicate using social media must determine that it can retain all required records related to social media and make them available for inspection.
While FINRA generally does not treat third-party posts as associated with the firm unless the firm adopts the post or becomes entangled with it, the recordkeeping rules still require retention of third-party posts if they relate to the firm’s “business as such.”
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Record-keeping Practice Tips Consider using third parties:FINRA and the SEC permit third parties to be retained for record-keeping. The firms should consider using such third-party software or developing internal software to maintain records, especially given the volume of records that can be created.
Archiving providers include Hootsuite, Arkovi, Erado, Socialware, Smarsh, Actiance and Hearsay Social.
Have a policy on personal devices. Raises personal privacy issues
Periodically test compliance by employees.
Pay attention to record-keeping of deleted posts.
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Personal Use of Social Media Every firm needs to develop a clear policy on whether employees can use personal
devices and personal social media accounts for business-related communications. While FINRA and the SEC leave it within the discretion of the firm, they seem to encourage
the practice of requiring employees to separate personal devices and accounts from business ones.
Not permitting business use on personal devices or accounts avoids entangling the firm in employees’ personal affairs.
The firm’s policy should address the types of business communications or content that is permitted on personal social media sites, if any.
Consider ban on Wikipedia editing.
Some firms require employees to respond to business-related messages received on personal devices or accounts with a non-substantive response and/or a pre-approved statement that directs the inquiry to other firm-approved media outlets. Need to consider labor law pronouncements on acceptable limitations on employee
speech.
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Supervision and MonitoringTo monitor social media use, a firm may consider
using sampling, spot checking, lexicon-based methodologies or a combination of methods.
As a general matter, supervision procedures should also consider supervision with respect to other securities laws, such as insider trading, private placement exemptions, etc.
Systems designed for IP protection may assist in monitoring.
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Social Media Policies SEC Risk Alert on Social Media:
Registered investment advisers and investment companies “must adopt, and periodically review the effectiveness of, policies and procedures regarding social media in the face of rapidly changing technology.”
FINRA and the SEC encourage firms to adopt a specific social media policy, rather than relying on multiple overlapping policies since the firm’s existing advertising and marketing policies may not accurately and consistently address the unique risks presented by social media communications.
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Considerations for a Social Media Policy
Every firm using social media should adopt and periodically review the effectiveness of policies and procedures regarding social media.
This specific policy should be tailored to the specific firm and the specific facts and circumstances, and the specific business purposes.
The policies should address which specific social media sites are permissible and whether such sites can also be used by a firm’s solicitors.
Care should be taken in drafting the policy, as arguably violations of the policies and procedures that do not otherwise violate the law could be construed as violations under Rule 38a-1 of the Investment Company Act of 1940 or Rule 206(4)-7 under the Investment Advisers Act of 1940.
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Conclusion A few final thoughts:
While the SEC and FINRA have offered guidance, they nonetheless permit a great deal of experimentation among industry participants as uses for social media evolve.
Compliance with requirements should not be a hindrance to experimentation, but devoting an appropriate amount of compliance support is crucial.
Social media platforms are constantly innovating, so your firm’s social media policy will also always be a work in progress.
By having specific business goals and understanding the compliance rules impacting those goals, fund advisers and distributors will be better suited to address where the risks lie and how best to navigate them.
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Moving Forward:Technology
Analytics
Tim Joyce WDS, A Xerox CompanyChief Innovation Officer
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Customer
Financial Services & InnovationFinancial and Securities Services• Over 20 years experience in fund industry• Industry knowledge/Proven track record• Partner with the Best of Breed providers • Dedicated experienced Account
Management allows our clients to focus on what they do best
Pain points & Dreams
Vision & Capabilities Breakthrough
Top & Bottom Line Growth
+ =
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Many uses of Social Media
SocialMedia
ResolveIssues
Marketing Outreach
MarketIntelligenceHuman
Resources
RegulatoryCompliance
Threat/Risk Protection
Customer Service
Recruitment
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Top Challenges with Using Social Media
Companies will need to listen to input from and communicate with customers not only by voice, but also chat, e-mail, instant messaging, mobile, and social media.”Customer Magazine, Oct, 2012
• Voice will decrease 38% over 3 years• Social Media increases 67%
(IDC, 2012)
• Managing and making sense of the Jumble of Data
• Regulatory Requirements• Business and Brand Impact• Customer Interaction
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Social is Big Data
Every Day
• 400M Tweets, • 800M Facebook updates, • 500 languages.
Anyone could be damaging or promoting your brand.
Customers aren’t looking to be entertained
They want to to seek and share experiences.
American Express Customers• 50% – seek social service.• 48% – post social praise.• 47% – post to influence others.• 46% – vent frustration.• 43% – seek advice from others.
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4Vs of Big Data
Velocity
Veracity
Volume
Variety
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Understanding Social Media is Hard
Love + Hate -
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Understanding requires context
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The “New” in Analytics
http://www.applieddatalabs.com/content/new-reality-business-intelligence-and-big-data
Requires advanced technologies:• Machine Learning• Statistics and predictive
modeling• Computational Linguistics• Cloud–computing• Text Analytics• Data Visualization • Graph theory • Sentiment polarity• Semantics and syntax
analysis
By 2020: 35 Zetabytes/yr
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Monitoring and Listening
Social Engagement:• Answer questions• Resolve Issues• Handle Compliance• Promote Brand
Social Insight:• Opinions and wants• Measure trends• Identify events• Root Cause
Where to start
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Big Data = Social Media = Computing Platform + Analytics + Data Management
The Computing Platform• Commodity hardware• Open source software
The Analytics• Advanced analytics tools
• Business Intelligence, Reporting & Visualization• Predictive & Prescriptive Data Analysis
• Big data analytics • increasingly complex & unstructured formats in large
volume• Data discovery & exploration
Data Governance & Management• Master Data Management
(MDM)• Data ownership & privacy• Data movement
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What is Different?
May 3, 2023 Xerox Internal Use Only42
By 2020: 35 Zetabytes/yr
Big Data = Transactions + Interactions + Observations Sources
Attributes
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Q & A
Kristin Ferguson, Social Media Community ManagerBoston Financial Data Services
Rajib Chanda, PartnerRopes & Gray
Tim Joyce, Chief Innovation OfficerTelecommunications & Technology, Xerox CommercialSolutions
