Personnel are being hired specifically to confirm that employee communications posted on social media Web sites are permissible, according to Watkins. If not, the information is copied and may become a human resource issue.
Some firms, Watkins adds, have been considering systems that would require employees to accept a compliance department rep as a Facebook friend to monitor activities. And some are randomly checking to make sure that employees are not using social media Web sites for business purposes.
Morgan Stanley Smith Barney, one of the most outspoken proponents of social media, has reportedly limited employee participation on Twitter to a series of company-approved "tweets."
Financial advisors say they'd love to make greater use of social media, but thanks to the regulatory climate, they're barred. "UBS rules are more stringent than Finra's," notes Dennis Melchior, a Palm Beach, Fla.-based financial advisor with UBS' Price Wealth Management. Melchior, who says he'd love to post information on social media about his extensive financial background, says he is only permitted to use LinkedIn-not Facebook. There must be a link to the UBS Web site. And he can only post a UBS-approved bio. For his education, he says, "I can put where I went to school, but I can't put down the types of degrees I have," he chuckles. "I can list that I worked at Salomon Brothers and First Boston, but I can't tell anybody what I did."
Elliott Curzon, a former Finra attorney and partner with Dechert LLP in Washington, D.C., says brokers generally are more heavily regulated than investment advisors when it comes to social media. Advisors, who provide services and have a responsibility to act as fiduciaries, don't get paid for the sale of products, and thus run a lower risk of providing misinformation about them.
Brokers, on the other hand, have a greater risk of saying something that is prohibited in advertising and communications rules, he says. Curzon says he has heard rumors that firms are developing surveillance systems similar to those used for e-mail. Keyword triggers may be set up, for example, to monitor employee online postings or chat room conversations. Problematic issues would be flagged for further review.
At least one California financial advisor, who asked not to be identified, is on LinkedIn, but says his compliance department wants to be able to monitor all correspondence. The e-mails can easily be tracked and saved, but message boards, discussions, Facebook and MySpace are prohibited. When he's on those sites, he can't make any reference to his line of work. "It would be nice to be advertising for seminars that we're doing," he says. "We're not able to do that."
One major problem is that he works with a lot of young physicians in medical school, and many use Facebook instead of e-mail. "If I want to reach them to confirm an appointment or follow up on any sort of business, [the physicians] prefer that I do it on Facebook," he says. "I have to tell them I can't."
Bailyn says his firm's turnaround time for online media approval typically is faster than most-often within 24 hours. Still, that's not exactly on pulse for a Twitter posting.
Bailyn, author of the book Navigating the Financial Blogosphere, says he might want to tweet something like, "Have you checked your 401(k) today?" A potential client response might be, "Yeah. I've been meaning to talk to you about that." Bailyn's understanding is that he would need to submit such a tweet to his compliance department. "My concern is I won't be able to be exactly on the pulse when seeking approval on a lot of content before it goes up," he says. "Social media is supposed to be on the minute."