Thin Wallets
Here's a shocker: Many Americans are in poor financial shape. If we didn't know that already, along comes a national survey on the financial capability of the U.S. put out last month by the Financial Industry Regulatory Authority (FINRA) that details some of the financial shortcomings of rank-and-file consumer finances.

According to the survey of nearly 1,500 American adults, nearly half of respondents have difficulty covering monthly expenses and paying bills. Of these, 14% said it was very difficult to keep their noses above water and 35% said it was somewhat difficult.
To make ends meet, 9% said they've taken out a loan from their retirement accounts during the past 12 months, while nearly 5% have taken a permanent hardship withdrawal. These actions are most common among people who earn between $25,000 and $75,000 a year.

Household expenses during the past year exceeded income for 12% of those surveyed, and were roughly equal to income for 36%. One-third of respondents said they had a large and unexpected drop in income during the past year because of the economic downturn.

Making matters worse for many people is that rainy day funds are drier than they should be. According to the survey, nearly half (49%) of people said they haven't set aside enough money to cover expenses for three months in case of illness, job loss or other emergencies.

And when it comes to saving for college, only 41% of respondents said they've set aside money for that goal. And among those who have, just 33% are using tax-advantaged savings accounts such as 529 plans or Coverdell Education Savings Accounts.
When it comes to financial literacy, 37% said their financial knowledge was at the top of the scale. But when put to a financial literacy test, just 30% correctly answered both a question about interest rates and inflation, plus a question about risk and diversification.

Trick Or Tweet
Next time you tweet on Twitter, remember that FINRA might be watching. Or, at least, it might want to look at that and other types of electronic communication when it conducts examinations into potential wrongdoing at financial firms under its jurisdiction.

In an October speech, FINRA's CEO, Rick Ketchum, outlined the agency's efforts to beef up its examination and overall regulatory programs to better combat financial fraud. Ketchum added that social networking sites such as Facebook, LinkedIn and Twitter present new ways to communicate with clients that raise new regulatory challenges. "For example, as currently designed they may not allow you to archive and maintain the communications on your own books and records," he said.

And that could be a costly problem. In September, Carr Securities Corp. was fined $25,000 for failing to ensure that its electronic communications were archived to a non-rewriteable format in an adequate time frame. In November, Terra Nova Financial was fined $400,000 for "failing to properly supervise its soft dollar program, failing to implement adequate supervisory procedures and failing to retain its business-related electronic instant messages."

Also in November, MetLife Securities and three of its advisory affiliates were fined $1.2 million for "failing to establish an adequate supervisory system for the review of brokers' e-mail correspondence with the public."

"Firms need to ensure that their electronic communications policies cover all forms of electronic communications, not just e-mail," says Stephen Marsh, CEO of Smarsh, a compliance and records management company. "Many firms currently ban the use of these newer mediums, similar to the approach taken circa 2003 and 2004 regarding instant messaging in the workplace. In reality, employees are using these tools and firms can be held liable for them, just as they are for e-mails sent from outside the office."