News Stay informed about the latest enterprise technology news and product updates.

Brokerage invests in social media archiving for FINRA compliance

When social media marketing initiatives challenged FINRA compliance, the compliance officer for a brokerage turned to social media archiving software.

When Henrik Sundstedt saw brokers at Crown Capital Securities LP creating LinkedIn groups, he knew that activity was going to present a new challenge for compliance at his firm. As senior vice president and chief compliance officer at the independent broker-dealer organization based in Orange, Calif., Sundstedt is well aware that Crown Capitol is a member of Financial Industry Regulatory Authority Inc. and thus subject to FINRA regulations.

"Our experience so far was basically LinkedIn, where we have a number of brokers," he said. "We're monitoring those manually and treating it like basic advertising. If they want to use it, they need to let us know and allow us to monitor it, along with notifying us of any changes."

Sundstedt said that once he saw that one his brokers had joined Twitter, however, he knew that he'd need a new means of archiving the social messaging generated on the social media platform to meet FINRA compliance guidelines.

We realize that it's going to be one of the marketing tools of the future. There will be more of them. We're trying to be proactive in learning how to archive them.
Henrik Sundstedtsenior vice president and chief compliance officerCrown Capital Securities LP

"Right now, we only have one broker, Dominic Sitowski, set up with marketing to Twitter," said Sundstedt. "We realize that it's going to be one of the marketing tools of the future. There will be more of them. We're trying to be proactive in learning how to archive them."

As a result, Crown Capital is using Smarsh Inc.'s Twitter archiving service as part of its broader program to ensure compliance with the multiple data retention regulations it is subject to in the financial services industry.

"We're sending out a year-end attestation that's been modified to acknowledge social media," said Sundstedt. "For Twitter, since we have an archiving tool, brokers will sign an acknowledgement that their messaging will be saved."

Sundstedt has been watching the amount and tenor of client interactions occurring on the different platforms that have to be archived for FINRA compliance. "So far with LinkedIn, it's really been quite static," he said. "Pages are glorified business cards. Brokers have put them up and haven't paid much attention. It's a lot like websites -- no one has done much with them. They haven't really grasped how to market through social media. Twitter is going to be much more active."

He said the brokerage hasn't been audited yet, but he expects his FINRA compliance to be evaluated next year. He added that when the auditors come, he also expects to be asked about whether he's archived social media messages for platforms that Crown Capitol has attested to. "Archiving will let us take a step forward with this kind of marketing," he said. "Once we get some archiving ability, then our marketing department can provide more tools in using that kind of media."

Sundstedt is working with his marketing department to both manage risk and maximize the investment in time and resources the firm has made. They're being selective in platforms, too: To date, Crown Capitol hasn't used Facebook for business yet. "From what I've seen so far, it's more personal and not business," said Sundstedt. "It's safe to say a lot of them have personal pages but none of them are using it for business. And right now, the basic policy is that Facebook will continue to only be for personal use. Until we can archive it, we're not going to allow a lot of business there. We require all of the same disclosures that any other archiving would have, including affiliation, just like we would anywhere else."

Sundstedt has two other compliance officers working with him to work through the FINRA compliance challenges presented by new platforms. Sundstedt said Crown Capitol will need to hire a new person to learn how to use the services and keep up with them, and make sure the company's sales force stays in FINRA compliance. Lack of control over independent use of social media can be a challenge in any organization, but when disclosures are legally mandated by regulations, any lack of clarity can cause real issues. "One of our brokers got on a blog and said something derogatory in a comment," said Sundstedt. "All of a sudden, someone chimed in and identified the broker as a member of our organization. The risks are regulatory and reputational, primarily to the brokers using it."

Podcast: FINRA guidance on social networking

Listen to the FINRA Electronic Communication: Social Networking Websites podcast.

That said, Sundstedt's assessment is that moving into this area is going to be a competitive differentiator for the firm in the years ahead. "A lot of other broker-dealers aren't going to do it," he said. "From a recruiting standpoint, it will broaden the group that we're targeting, as well as giving our own brokers a better avenue for marketing. I think it will pay off -- or least there's the opportunity for it. If we do it right, it will be worth adding the staff person for it."

The trick with social media is going to be to stay in front of it, he said. "Right now, Twitter is the hot thing. Guaranteed, there will be a new service soon. For us, keeping up with it is going to be the biggest challenge."

Let us know what you think about the story; email: or @reply to @digiphile on Twitter. Follow @ITCompliance for compliance news throughout the week.

Dig Deeper on Data retention and compliance software

Start the conversation

Send me notifications when other members comment.

Please create a username to comment.