Did you know that a Facebook post has a lifespan of just six hours, while a Tweet loses relevancy as quickly as 15 to 20 minutes?
Even so, social media offers an opportunity to reach audiences far beyond your firm’s email list or local prospecting pool. Statista projects that (despite recent declines) X will have more than 335 million users in 2024. That reach represents the possibility of connecting with more people through quality content.
Of course, social media doesn’t come without its risks – especially when it comes to regulatory compliance. Just last year, the Securities and Exchange Commission (SEC) charged ten separate broker-dealers and advisers for “failure to maintain and preserve electronic communications.” The resulting fines were just shy of $80 million.
Let’s explore how your financial firm can successfully employ social media marketing (and their associated messaging capabilities) while keeping compliant in 2024.
Why is Social Media Beneficial for Financial Firms?
There are a few main reasons your firm might find social media marketing and communication platforms appealing, including:
- Brand visibility and credibility
By engaging with others on social media platforms, you can reach a wider audience and showcase your expertise. Plus, prospects might feel more confident in your firm’s “legitimacy” if you have a strong digital presence.
- Easier client engagement and communication
You can answer questions, comment on financial topics and share helpful content with just a push of a button – either to the entire world, a select group of people, or even a single individual.
- Marketing and promotion
Popular social media platforms like Facebook, Instagram, and X provide advertising tools for your firm to promote your services.
- Recruitment and networking
An online presence can help you to attract strong candidates to your firm or connect with centers-of-influence (COI) to grow your professional network.
What Do Financial Firms Need to Know About Social Media Compliance in 2024?
If your firm chooses to use social media for any or all of the above uses, you need to be aware of the accompanying risks.
As a financial professional, any exchange of information done over social media-enabled messaging apps (such as Facebook’s Messenger) could put confidential client data at risk. While Facebook provides end-to-end encryption protection, only X’s verified subscribers have access to that security measure – and it doesn’t work for group chats.
Related: Tips & Tricks for Chief Compliance Officers: Manage Social Media Risk
Beyond shaky data protection, social media posts and communications are also subject to regulatory advertising, recordkeeping, and employee monitoring rules and laws.
Strategies to Enhance Your Firm’s Social Media Compliance
Ensuring that each member of your team is using their personal, professional, and official firm accounts in accordance with such laws can be difficult, especially as they may be logged in on both company and private devices. That said, these are three strategies your firm can implement to enhance your social media compliance program:
1. Become an archiving expert
The SEC and Financial Industry Regulatory Authority (FINRA) demand that firms keep accurate and accessible records of their communications, including those on social media platforms.
For example, SEC rule 204-2 requires firms to keep and maintain all customer queries, advertisements and posts, while FINRA’s Books and Records Rule “requires registered broker-dealers to make, keep, furnish and disseminate records and reports prescribed by the SEC” for a minimum of three years.
In order to meet these requirements, many firms invest in an archiving solution.
Archival isn’t as simple as keeping a back-up copy of your records – FINRA provides numerous stipulations for any electronic recordkeeping systems (ERS) your firm uses, including specifications for formatting, verification, download capabilities and more.
As you explore ERS options or other archival methods for your social media accounts, consider whether the solution of choice can effectively capture all communications (including any images, videos, and links) in compliance with federal and state laws/rules. We also recommend that your firm regularly audit and test any such systems to identify gaps or issues that may arise.
2. Get proactive about cybersecurity training
Your employees are often the first line of defense against cyber threats, and proactive cybersecurity training is essential in building a resilient workforce.
Take the time to develop robust policies and procedures that address best practices for social media use, including:
- Proper password protection
- Which devices are appropriate for business-related use
- How to recognize security threats or scams
- What to do in the event of a potential cybersecurity breach
- What type of communication is appropriate for social media platforms (and which aren’t)
- And more
Offer regular training sessions and resources for your team members to ensure they’re familiar with social media policies, as well as the potential results of a failure to comply.
Related: Tips & Tricks for Chief Compliance Officers: Building a Culture of Compliance
3. Stay updated on regulatory advertising and testimonial rules
Just as social media platforms change, so can the regulations surrounding them. Staying abreast of the latest regulatory guidelines is imperative to avoid compliance issues.
For example, the updated SEC Marketing Rule (which went into effect in November 2022) allows for the use of client testimonials and endorsements – with the proper disclosures. Additionally, any promises or guarantees that could mislead your prospects or clients will likely land you in hot water with regulators.
We recommend that you establish a dedicated team or designate individuals within your compliance department to be responsible for monitoring and interpreting regulatory changes related to social media.
Looking Ahead: The Future of Artificial Intelligence and Generative Social Media Content
A recent Investment News article noted that the surge of artificial intelligence (AI) content and tools available (many of which are social-media focused) is on the minds of many financial professionals – but we’ve yet to see any concrete guidance from regulators.
However, the article also notes that an executive order from October 2023 demanded more safety assessments and research on AI, which could indicate stronger regulation on generative content for financial professionals. Whether that guidance makes its debut in 2024 is yet to be seen.
As your firm carves out a marketing strategy for 2024, it’s likely that social media’s powerful reach and easy communication capabilities will make it somewhere on your list. But before you start posting, it’s critical that you develop strong archival processes, cybersecurity measures, and methods for staying updated on regulatory changes.
Social Media Compliance with COMPLY
And COMPLY can help with that! COMPLY offers consulting solutions to help firms navigate social media compliance.
Our team of industry veterans possesses decades of experience deciphering complex regulations, including the latest SEC rules, FINRA updates, and social media guidelines. We bridge the gap between regulatory requirements and your business needs, ensuring your social media presence remains compliant while minimizing burdens on your internal processes.
COMPLY consultants go beyond just compliance. They’re trusted partners, helping you develop a strategic compliance framework that fosters transparency and builds trust with clients, regulators, and all stakeholders.
Ready to explore how COMPLY can enhance your firm’s compliance? Let’s talk!