Everybody knows what social media is. Or do they? "There is no exact definition," Gina Gombar, first associate chief of enforcement of the Massachusetts Securities Division, told a group of advisors at a conference last month. And that could be a problem as social media use by advisors increases and regulators continue to grapple with how to best oversee its use.

A recent SEC publication, Gombar noted, said social media was an "umbrella term" that encompasses various online activities. In other words, it goes beyond Facebook, Twitter and LinkedIn. 

Gombar and other Massachusetts securities officials addressed more than 400 advisors gathered at an investment advisor training conference in Marlborough, Mass., where one of the panels focused on social media. 

Results from a July 2011 survey by the Massachusetts Securities Division found a significant growth trend in advisors using social media, but also found compliance deficiencies in existing social media regulations. For example, more than half of the firms the division polled don't retain all the content posted on social media Web sites they maintain or operate. And more than half of the firms don't currently monitor or review social media content produced by its employees related to business.

Furthermore, a majority of firms don't monitor or review content posted by third parties--such as clients or prospects--on social media Web sites the firms maintain.

"The usage rate of social media has outpaced the regulator guidance," said Greg Abram, an attorney at the Massachusetts Securities Division. He encouraged attendees at the conference to use social media as long as they comply with the law, but cautioned that many social media messages could be considered advertising and that client activity could be considered testimonials in certain circumstances.

To be compliant, advisory firms should have a social media policy for all employees and should retain records and monitor activity. Firms that provide clear guidelines not only help their employees avoid fraud, but will have a process that makes it easier to spot compliance no-nos. 

Gombar said the audits performed by Massachusetts "cross-reference cyberspace with reality." Information that an advisor puts online becomes a digital fingerprint, she said, one that's easy for auditors to find. 

Social media guidance will be an interesting area to watch in 2012. The regulations are somewhat confusing, and the increased involvement by state securities departments will either bring some needed clarity or further confuse an already complicated topic.

"It would be unfair to ignore this area," William Francis Galvin, Massachusetts' secretary of the commonwealth, told the conference. "We are not trying to make your life more difficult. It is to make your life better and your clients safer."

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