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Forget Facebook tabs: Why Timeline and News Feed are prime social real estate for your bank

Ed. note: The following post, penned by Hearsay Social Compliance Officer Ally Basak Russell, originally appeared in ABA Banking Journal.

Facebook’s recent conversion to the Timeline format for business pages should be changing the way your bank approaches social media overall.
It’s time to adjust your strategy by taking advantage of the new format, as your existing page or pages will be automatically transitioned to the new format very soon, if they haven’t been already.
With this stylistic shift, Facebook encourages companies to tell stories and engage in two-way conversation, rather than using Facebook as just another medium for one-way brand advertising.
To this end, content posted in the Timeline appears in two adjacent columns with the most recent posts at the top. Also, banks have not one but two images to convey their brand attributes–they can now add a large cover image to complement their existing profile photo. (You can view an interactive schematic of the Timeline feature here.)
Changes in the treatment of Facebook apps, and the stress that Timeline puts on content will drive some new thinking at your bank.
Facebook Banks Timeline

How apps’ status changes

But perhaps the biggest change is that Facebook apps, formerly called “tabs,” can no longer be set as default landing pages when customers and prospects visit the bank’s page. Directing customers to a social campaign tab before they’ve liked your bank’s page is a term known as “fan-gating,” and this will no longer be possible.
Now, only the bank’s timeline can be the default landing page.
Additionally, these apps no longer take up prime real estate on your bank’s Facebook page. At first displayed on your page as small buttons, the buttons must be clicked by a user before they are taken to the app’s full page.
So, if tabs were the Boardwalk of social real estate in the old format, their replacement apps have now been relegated to social media real estate more like Baltic Avenue, or when done right, Marvin Gardens.
To be fair, apps can still be effective for soliciting participation in campaigns–by clicking on something, entering information in a lead generation form, or looking up the nearest bank branch. Since apps often mimic other digital campaigns, your bank’s digital presence will be cohesive and interactive when you use apps.

Rethinking your social approach

Another thing to consider: recent studies by Facebook show that after the initial “like” or viewing of a business page, consumers are not likely to come back to your page, no matter how positive their first experience.
Ever.
Consumers are 40 to 120 times more likely to see your posts in their news feeds.
So why should banks even spend resources to maintain a dynamic social presence?
The answer is simple: Compelling content, as opposed to compelling design or digital campaigns, is more important than ever because now the Timeline is the bank’s prime social real estate.
Essentially, if your bank is like many large corporations whose agencies invested heavily in Facebook tabs, you may want to pivot your social strategy.
Engaging with consumers based on the quality and quantity of your social copywriting is a change for which bank marketers should be prepared. This can be at the corporate or local branch level, but content must be authentic and human.

Candidates for content

What can your bank talk about? There are plenty of wonderful seasonal stories, stories about corporate philanthropy, contests, and educational resources that can be shared on the corporate bank page. Posting photos of employees is another great way to humanize your bank. Also, be sure to fill in your bank’s Timeline with its date of incorporation and other important milestones, like the introduction of a new product, service, or logo, or expansion into new regions.
Sharing localized authentic content is even better. Hearsay Social research indicates a six times increase in engagement level as measured by likes, comments, and shares, when companies incorporate local news, events, and preferences into content. This may include info on a local football game, charity event, or promotions aimed at the city’s sports teams.
Educational content for customers and prospects is also a sure bet to draw engagement. Banks can post tips on how to save for college or retirement, build credit, or apply for a loan.
Inversely, stale or bland corporate content won’t show up in customers’ or prospects’ News Feeds at all. This is because Facebook employs an algorithm called EdgeRank. This algorithm takes into account views, click rates, likes, and reshares, in order to determine engagement and to prioritize what appears in users’ News Feeds.
In short, if you have lots of engagement your posts will show up in News Feeds. In regulated industries like banking, writing content that is both engaging, helpful, and compliant can be challenging. It takes collaboration between the marketing and compliance/legal teams.

Fresher than eggs…

And you need to keep the content timely. You can’t just post when the spirit moves you. Facebook agrees with this, and has implemented various new features that encourage fresh content.
Pinning a post keeps it at the top of your Timeline for exactly one week. Even if new posts are created they will appear below the pinned content. Posts you might want to pin include special promotions, such as a bank fundraiser, an open house for a new branch location with giveaways for opening a new checking account, or a financial advisor sharing his top 10 tips to prepare for retirement. Similarly, highlighting a post doubles its width across the page, making it much more visible as users scroll through the timeline.

A stark reality banks must face

Facebook’s nearly one billion users don’t come back every day to be sold products and services.
They come back to connect with family, friends, and, yes, brands.
The shift to content and away from tabs allows your bank to be more authentic and compelling than ever before–deepening your relationship with customers through two-way communication rather than just one-way advertising.
If you can engage customers in conversation, they will have a reason to keep your posts in their News Feeds. And that’s crucial for bank marketers.

Six steps to transform your bank into a social business

Ed. note: The following post on social business ROI for banks, penned by Hearsay Social Compliance Officer Ally Basak Russell, originally appeared on American Banker’s Bank Technology News.

One need only to visit a local bank branch to know that social media has taken the banking industry by storm. Wells Fargo ATMs display “We’re on Twitter” as a parting thought to customers. Citibank proudly posts the Facebook, Twitter and YouTube logos on its home page. U.S. Bank and SunTrust have switched over to the new Facebook time-line format, complete with branded cover photos.
Yet at a recent conference, Cathy Nash, CEO at Citizens Republic Bancorp, said she was “very reticent today to dive in” to social media for the company. The bank has two FTEs devoted to social media and will not spend a penny more until Nash sees a return on investment on that effort.
Why would any bank embrace social media only halfheartedly?
Some fear they will run afoul of existing and pending regulations. But I believe the more compelling answer is that many banks are unaware of the immense business opportunity that social media presents across the enterprise in many business units and roles.

1. Marketing

U.S. Bank asks customers to “like” its Facebook page, to “learn how to stay on top of your savings with S.T.A.R.T. (Savings Today and Rewards Tomorrow).” The S.T.A.R.T. program not only helps consumers put money away through automatic transfers to a savings account, but also benefits the bank by having more consumers establish long-term accounts with more assets at U.S. Bank.
In its Facebook promotions for its Freedom Card, Chase asks consumers to answer a question and enter personal information for a chance to win a $1,000 gift card for grocery shopping. Consumers’ self-reported information generates new leads for the credit card division. Wells Fargo also gets it right with a recent post asking consumers, “Does retirement planning stress you out? You’re not alone. The good news is saving for retirement just got a lot easier … you can make it automatic!” When consumers engage, they are taken to a page where they can open a retirement account online.
Corporate communications and public relations can be enhanced with social media. SunTrust uses its Facebook page to promote its “Wall of Service,” a digital place where employees are honored for community service with organizations like the Susan B. Anthony Recovery Center or the United Way. Such an application fosters a sense of community for current employees and humanizes the SunTrust brand. Consumers are either compelled to return to the page or persuaded to allow SunTrust’s posts to remain in their news feeds.
Likewise, social media can be valuable in mitigating and managing bad press. Take the protest launched against Bank of America last October for imposing a $5 debit card fee on customers or the social fiascoes that Citibank and PNC experienced when their online sites went down. Addressing PR risks in the form in which they catch fire is an effective way to contain trouble that could cost the bank customers, investors and consulting fees to bandage a tarnished reputation.

2. Customer Service

Quick and authentic customer service on Twitter can provide value through operational efficiency, a point illustrated by Citi’s hiring former Comcast executive Frank Eliason. Give customers a place to be heard and they will put more money in their checking and savings accounts. Answer their questions about checking and savings accounts, and they will be more likely to open a credit card or take out a home mortgage with the bank. The costs per customer are minuscule compared with other modes of communication. For every happy customer you serve via Twitter or Facebook, many more see your reply and respond favorably. And while you serve customers, you learn valuable information about your customer base – their preferences and behaviors based on where they live, income level, cultural affiliations and other key demographics.

3. Sales

This is the No. 1 underutilized group with respect to social media. Sales teams should be prospecting in social media. LinkedIn boasts a more affluent and educated audience than TheWall Street Journal. In the private banking and wealth management lines of business, sales reps need to use it as a prospecting tool. Likewise, the LinkedIn profile is a branded point of contact for inbound leads to get in touch with your people.

4. Market Research

On the institutional side, social media presents another tool for banking analysts to research market trends, get timely market news, and better analyze the exposures and strengths of the companies the bank merges, finances or buys.

5. Human Resources

Studies show that the new era of financial professionals have grown up with Facebook and are more likely to apply, interview and accept offers with a company that exhibits innovation and embraces the tools that work best for them. JPMorgan Chase uses Facebook to attract undergraduate and graduate students to internships and full-time opportunities on its Careers application. Banks can also purchase Facebook Ads targeting profiles of ideal candidates – for example, undergraduate economics majors at top-10 universities.

6. Employee Satisfaction and Retention

Public or private LinkedIn and Facebook groups, with proper privacy controls built in, are ripe forums for internal collaboration and building a sense of community among bank employees. Bank of America does a nice job of this and has recently created subgroups for employees to have richer and more tailored discussions.

Handling negative customer sentiment on your bank's social media pages


The below piece, penned by Hearsay Social Head of Compliance Ally Basak Russell, was originally posted on ABA Banking Journal. The article explores the nuanced and still developing world of social media for banks, particularly in regard to policy for deleting and responding to negative customer posts:

The rise of social media presents unprecedented opportunities for banks to generate mindshare, build brand loyalty, increase referrals, and ultimately sell more financial products to more customers. Last year, bank marketers scrambled to popularize Twitter hashtags that reference their brands; add social icons to their websites, brochures, and television commercials; and create lead generation tabs that lived within their Facebook pages. This year banks are creating compelling Facebook cover photos for their timelines, enabling their employees on LinkedIn, buying sidebar ads on Twitter, and optimizing their social pages for SEO.

Where social platforms and traditional customer service intersect

These tools and practices have undoubtedly set new standards for cross-channel marketing in financial services. But in my view, the power of good old-fashioned customer service remains one of the most underestimated and overlooked marketing initiatives in the banking sector. This is especially true for community, mid-sized, and regional banks, which may have limited budgets, staff, and design resources for social media and other forms of digital marketing.
Studies show that banks risk becoming irrelevant or even offensive without proper social media initiatives and staffing in place. In fact, “Predicts 2012: The Rising Force of Social Networking and Collaboration Services,” a recent Gartner study, predicts that “[b]y 2014, refusing to communicate with customers via social channels will be as harmful as ignoring emails or phone calls is today.”
By publicly servicing customers on corporate and local branch pages and Twitter feeds, banks can resolve support and service problems in a timely and efficient manner. Likewise, banks demonstrate integrity by owning up to problems and letting consumers watch them make amends.
When consumers see their peers’ issues being resolved, positive sentiment about the bank is reinforced. Customer servicing through social sites is especially powerful when positive experiences are shared, liked, commented on, or retweeted. As bank employees resolve concerns or support issues, they promote their corporate values and model their brand attributes through the tone and quality of responses.
The downside of social networks is that they also create very public forums for disgruntled customers, ex-employees, or others to criticize bank products, services, or corporate leadership. Without the right support and planning, social media sites can also cause banks to run into regulatory and legal problems, especially when employee discussions involve highly regulated financial products such as checking accounts, credit cards, and mortgages.
These risks present a bank’s social media marketing manager with a serious dilemma: To delete or not to delete posts on the bank’s social media pages. Here are some practical points on when to remove and when to respond to negative consumer posts.

Removing vs. Deleting Data

To be clear, there is a big difference between removing a post from your bank’s Facebook wall or Twitter feed and deleting social media data permanently.
After all, customer complaint reporting, FINRA Advertising and Communications with the Public, SEC Books & Records, and even Truth in Lending regulations require financial services organizations to keep records of social messaging. To meet these requirements, many banks use enterprise platform vendors to capture, archive, serialize, and retrieve complete records of social media data. (Hearsay Social is a vendor of such services.)

1. When to Delete

Some marketers would caution against deleting comments in any situation. One recent study by BNY Mellon Corporation and St. John’s University concluded that “large corporations do not generally approach negative comments as public relations opportunities, but prefer to censor or ignore critical feedback.”
However, the following situations call for removing posts from a risk management, compliance, legal, or public relations standpoint. Be sure to contact your compliance and/or legal team before deleting or responding to a consumer’s post on behalf of your bank–it is crucial that marketing staff and financial advisors alike are trained on the compliance and legal significance of social networking.
Profanity: If customers and prospects will likely be offended by viewing the post, this trumps any positive sentiment the consumer will feel toward the bank for addressing the criticism head on. Most banks choose to delete such posts and even use automated platforms to detect and automatically delete posts that contain profanities.
Discriminatory statements: Banks must also be on the lookout to delete comments that could violate anti-discrimination laws. Conversations about mortgage rates or loans could trigger fair-lending issues.
Misleading advertisements: If your bank has launched a “local” social initiative and has regional or office pages or accounts, your bank should also remove posts that could be considered misleading advertisements by regulators. For example, conversations around credit cards could violate fixed vs. variable APR guidelines. Without proper disclosures, employees could violate Truth in Lending (Reg Z) laws around interest rates or payments. Consider prohibiting the discussion of specific financial products in your bank’s social media policy.
Non-public (private) customer data: In some situations, customers will post their physical address, date of birth, social security number, phone number, or social security number on social sites. As with profanities, many banks delete such posts immediately. Maintaining customer privacy is not just a security or regulatory issue–it also makes good business sense. Private customer data on your pages are likely to attract fraud and/or spam.

2. When to respond

Thankfully, there are times when the bank and the customer can get some use out of social platforms. Care is still required.
Respectful customer complaints: When customers get answers to their questions quickly, they feel valued. Keep up the conversation until the issue gets resolved. Apologize for inconvenience. Remember that if you don’t answer customers’ questions or negative comments, someone else may. Address any negative conversations early so they do not spread. Banks can demonstrate customer appreciation by interacting with customers in their preferred mode of communication. This will be especially important as Generation Y becomes the banking industry’s core customer base. Consult legal, compliance, and risk management teams often.
Mentions of competitors: As in any industry, the social team at your bank is probably inclined to delete or ignore questions or comments about competitors’ products or services. Consider this carefully.
Consumers know that no bank will get only positive feedback on its pages. Deleting praise of, or comparisons to, competitors could actually hurt your brand by impeding perceived transparency. If no other response is appropriate, acknowledge the criticism politely and move on.

Make your approach systematic

Customer servicing on social sites is an economical, effective, and authentic way to increase customer satisfaction, brand awareness, and bank affinity without utilizing overt marketing techniques. Perhaps nowhere else are customer service, marketing, public relations, and legal/compliance so intertwined as on a bank’s Facebook or Twitter page.
Training your social media marketing team on the regulatory and legal risks of responding to and removing consumer posts is crucial to any successful social servicing strategy. By doing so, you can take advantage of the tremendous upside of social media—creating an authentic, transparent, and meaningful dialogue with your bank’s customers and prospects.

Reporting from the SIFMA Compliance and Legal Society Annual Seminar

It’s an exciting time to be working on social compliance at Hearsay Social. Not only are we a SIFMA strategic partner, but we also just announced today that we now power social marketing success and regulatory compliance for Ziegler, a specialty investment bank and a leading financial services organization.

Dedicated to serving Hearsay Social customers and leading the way in social compliance, I recently traveled to Miami, Florida to attend the SIFMA Compliance and Legal Society Annual Seminar. The panel on emerging technologies like social media was very well-attended with panelists from Vanguard, Fidelity, RBC Capital Markets, Bank of America Merrill Lynch, Bingham McCutchen, and FINRA.

Below, I share my five most important takeaways from the social media panelists and my conversations with compliance and legal professionals whom I met at the event.

1) Don’t fear the Like button (in most instances).

  • Since the SEC issued its Risk Alert on Investment Adviser Use of Social Media in January, many journalists have sensationalized the guidance, construing it to mean that all instances of the Like button in the financial industry would constitute prohibited client testimonials for SEC-registered Investment Advisers.
  • Panelists stressed that this alarm was not the intention of the SEC and that they expect FINRA to clear up the confusion surrounding the Like button in their next notice. Essentially, the Like button cannot be banned by financial services across the board.
  • Only in very limited and specific situations could a client clicking an adviser’s post (as opposed to an adviser’s overall page) create a problem. Even then, the content of the post would be determinative in whether or not liking a post would be considered a client testimonial.

2) Firms must consider employee privacy and provide sufficient disclosure about what will be retained by the firm.

  • Many publications have featured stories about job applicants being asked to provide social network passwords to potential employers, which has been quickly denounced as a breach of privacy.
  • Likewise, the panel discussed the NLRB’s second social media report, detailing cases in which employees were fired for protected, concerted activity, like talking about work conditions or pay with co-workers in the scope of employment around a virtual water cooler (i.e. social media sites).
  • The takeaway for financial firms is that they must clearly state a code of employee conduct in their social media policies. However, social policies cannot be overly broad so as to “chill speech.”

3) Employee collaboration tools and compliance solutions to support them are top of mind with the FINRA Social Media Taskforce and several member firms.

4) Firms want more retrieval functionality to quickly access their social data for audits or e-discovery requests.

  • One panelist said that technology integrations are key to efficient retrieval of social data.
  • Compliance officers want to be able to pull up archived content and approval records quickly with full threads, lots of filtering functionality, and more.
  • Hearsay Social financial services customers use our compliance module, which shows comments to reviewers in context, classifies social media content by type, and offers instantaneous, self-service export of archived data, along with several other features for complete compliance.

5) Revisions to proposed FINRA Rule 2210 are out now.

  • Last week FINRA issued a response to comments on its Proposed FINRA 2210, which we wrote about in an article for Financial Advisor Magazine back in August.
  • Under the new rule, interactive posts/tweets will no longer be classified as “public appearances” but the distinction between static and interactive content and their differing pre-approval requirements will remain.
  • Posts/tweets will not need to be pre-approved or filed with the FINRA Department of Advertising (but must still be monitored).
  • Advisers’ social media profiles and other static content must still be pre-approved and monitored.

Many thanks to the panel’s moderator and our strategic partner, SIFMA, for putting on such a candid and timely panel. We look forward to attending more of these events and working every day to better serve you, our customers in the financial services industry.

Hearsay Social and SIFMA join forces to empower financial organizations on social media

Today Hearsay Social announced a strategic partnership with the Securities Industry and Financial Markets Association (SIFMA), a leading voice for the financial industry.

Representing hundreds of the most prominent securities firms, banks, and asset managers, including Bank of America Merrill Lynch, Wells Fargo Advisors, and Goldman Sachs, SIFMA has strived to develop policies and practices that empower nearly 800,000 people nationwide working in the industry. 
In this new era, it cannot be denied that one policy in particular has dominated the conversation: the broker-dealer’s “social media policy.”
While in prior years many banks and other financial organizations typically defaulted their policy to blocking employee use of social media, our increasingly social and mobile era has proven that blocking business use of social media is no longer a viable option. In the wake of FINRA issuing its first social media fine in March last year, SIFMA hosted two events–featuring thought leadership keynotes from Hearsay Social–that spotlighted social media as a growing force in the financial industry and what firms must do to address regulatory compliance.
At the SIFMA Annual Operations Conference and Exhibit in May, Hearsay Social CEO Clara Shih, Dr. Robert Ellis (former SVP of Technology Innovation at Bank of America), and I co-presented a session entitled Compliance Hurdles and Business Value for Financial Firms. The next month, social media once again took center stage at the SIFMA Tech Leaders Forum, where our Director of Sales Kristin Shevis joined Brian Tietje (SAE, Financial Services at LinkedIn) and Dr. Ellis in a conversation around compliance and social media ROI.
As you can see, we’ve worked with SIFMA for some time, but are now excited to formalize our relationship through a strategic partnership.

Empowering the financial services industry

Hearsay Social will continue to offer our customers trustworthy technology solutions that promote sound supervision, recordkeeping, and reporting while allowing reps to embrace the immense business value of social media. As the only compliance solution provider that integrates with all four major social networks–LinkedIn, Facebook, Google+, and Twitter–we are the only truly comprehensive enterprise social marketing platform for financial services organizations.
Our platform offers five main components:

  • Hearsay Social Content Publisher for scheduling posts and campaigns across firm, business unit, and individual employee profiles
  • Hearsay Social CRM for deepening customer relationships
  • Hearsay Social Analytics to roll-up metrics across all firm and employee profiles
  • Hearsay Social Compliance Module for FINRA/SEC compliance and infraction monitoring, brand protection, and Rogue Page Finder
  • Hearsay Social Enterprise Architecture including enterprise scale and single sign-on

What makes our Compliance Module so robust, of course, is our keen attention to evolving FINRA guidance. Because we live and work in The Facebook Era, social media is still evolving. How regulators interpret rep use of social media to fit to existing regulations, or rather revise these regulations to fit new modes of communication, will continue to develop. Similarly, industry norms on data retention will continue to evolve.
Hearsay Social plans to stay at the forefront of innovation by closely following industry developments with SIFMA as a close ally. Representatives from our company will continue to appear at SIFMA events in New York and Washington, DC, as well as other industry conferences. We’ll work towards training SIFMA members on the lessons we’ve learned from our customers while maintaining an active dialogue with regulators, so that we aren’t just responding to Regulatory Notices, but also informing and shaping them. And, perhaps most importantly, we will use what we learn from our extensive research and discussions to iterate upon the best possible compliance solutions for our customers.
As a SIFMA Strategic Partner, we hope to serve our customers even better and delight compliance officers across the enterprise.

Massachusetts state regulators weigh in on social media

As it turns out, federal securities regulators aren’t the only ones issuing guidelines on social media usage. Now states are getting in on the action.
After it surveyed the state’s 576 registered investment advisors, the Massachusetts Securities Division found that 44% of advisors use at least one social media site, like Facebook, LinkedIn, or Twitter. And yet, according to the Division, many of these social advisors are not ensuring that the proper recordkeeping and compliance procedures are in place.
Here are several key findings by the Division:

  • Yes, an investment advisor can use social media to discuss its business. However, advisors should be aware of new regulatory and compliance issues that can arise from the use of social media.
  • Social media matters to advisors because it opens up new paths of interaction and communication.
  • As a general rule, social media pages for advisors will be considered advertising. In turn, those social media pages are therefore subject to the same regulatory requirements as other forms of advertising.
  • Advisors are held accountable both for content they themselves create and (in some cases) content they either helped create (entanglement) or endorsed (adoption).
  • The Division agrees with the SEC in saying that a client “liking” an adviser’s Facebook page may in some instances, but not always, make it a testimonial. On LinkedIn, the problem is less sticky since advisors can simply choose not to accept client recommendations, once they have been trained that this violates regulations prohibiting testimonials in advertising.

Whether your advisors answer to federal or state regulations, Hearsay Social is the only provider of complete compliance and complete coverage on social media.
To learn more about these findings and others, read the Division’s letter here.

Recent action by SEC – What it means for Compliance Officers

Last Wednesday the U.S. Securities and Exchange Commission (SEC) charged Anthony Fields, an Illinois-based independent advisor, with offering more than $500 billion in fictitious securities to his LinkedIn connections. (The SEC simultaneously issued three Risk Alerts. More on those can be found here.)

According to the SEC, Fields made “guarantees” to potential investors and tried to sell them specific financial products via LinkedIn. He also provided false and misleading information to the public concerning his company’s assets, clients, and operations. He projected himself as a FINRA-registered broker-dealer, even though he wasn’t licensed.
This was a case of attempted fraud, pure and simple: the man was not registered with the SEC, and the securities he attempted to sell did not exist.
Robert B. Kaplan, co-chief of the SEC Enforcement Division’s Asset Management Unit, released a statement saying “Fraudsters are quick to adapt to new technologies to exploit them for unlawful purposes.” Some reporters misinterpreted that statement and sounded the alarms on social media—citing new platforms of communication as breading grounds for consumer exploitation.
Let us be clear. New channels of communication are not the problem. Consumers/investors can’t be defrauded without a person behind the deceit. And fraudsters will find a way to approach their victims, if not via social media, then through in-person meetings, phone calls, email, or any other mode of communication.
So, even though social media isn’t the cause of the fraud, what can consumers can do to protect themselves? Understanding any platform that one uses, implementing appropriate privacy controls, and using the same common sense and intuition that we would for in face-to-face interactions are key.
Key Takeaways
Financial institutions can also protect consumers by closely monitoring advisor use of social media. In the case of enterprise-scale use of social media, technology is crucial to preventing infractions of SEC and FINRA regulations and preventing fraud. Equally important, social media empowers advisors to communicate with consumers through a new productivity tool.
The Hearsay Social Compliance Module is designed to prevent this type of incident for our customers. If Fields had worked for a Hearsay Social customer, his “guarantees” to potential investors would have been picked up as potential infractions and the specific product recommendations would have been flagged in our Supervision and Real-time Remediation features. And if Fields had projected himself as working for a Hearsay Social customer but didn’t, our patent-pending Rogue Page Finder would have picked up his profile.
The SEC and FINRA have made it it clear that they will not tolerate fraud, no matter whether it occurs over the phone, over email, or over social media. Compliance Officers should make sure they are deploying an enterprise-wide compliance solution soon.

Live from FINRA Ad Conference: FINRA Rule 2210 is coming

This morning Kevin Eversen and I attended the General Session of the FINRA Advertising Regulation Conference in Washington, DC.
Panelists included Tom Pappas (VP of Advertising Regulation at FINRA and co-author of the regulatory notices on social media 10-06 and 11-39), Tom Selman (EVP of Regulatory Policy), Joe Price (SVP Corporate Financing/Advertising and co-author of the Notices 10-06 and 11-39), and Joe Savage (VP Investment Companies Regulation).
The session kicked off with some interesting stats related to the conference and social media:

  • 470 paid attendees.
  • Entire FINRA advertising staff is here.
  • Social media is the topic that received the most attention for the second year in a row.
  • In addition to Day 2 General Session, the Nuts and Bolts panel will have info on social media/electronic communications. (Stay tuned!)
  • New panel added on how marketing and compliance departments can work together. (Content will likely mirror the WOMMA conference at which I’ll be speaking later this year.)
  • Due to demand, increased number of social media vendors this year.

The panel then transitioned to updates on the consolidation of NASD and NYSE Communications Rules, which we reported in a Financial Advisor Magazine article last month. As a result of the Dodd Frank Consumer Protection Act, deadlines have been imposed on the SEC to pass rules more quickly.
The big news is that the SEC is expected to pass FINRA Rule 2210 next week, which will combine NASD Rule 2210 and 2211 and their interpretive materials. The new rule lays out an exception to the preapproval requirement for social media: firms and reps will not need to have a principal approve the content of a status update, post, or tweet prior to it being posted on an online interactive forum such as a LinkedIn/Twitter feed or Facebook Wall. This rule change would essentially codify the positions laid out in Regulatory Notice 11-39.
Notably, yesterday Morgan Stanley Smith Barney’s Director of Social Media, Lauren Boyle, and Socialware’s Chad Bockius discussed their take on FINRA Rule 2210 in a webinar.
Boyle was quoted as saying, “’We consider every tweet to be static content requiring preapproval at this point.”
Today, FINRA disagreed with that analysis: the panelists went on record to confirm that tweets and posts are indeed not considered static content under 11-39 and therefore need not be preapproved. Many thanks to FINRA for definitively answering the question we’ve been asking. (Find our analysis on this from the recent CEFLI/NAIC/FINRA social media forum here.)
Hearsay Social has the workflow technology to route and timestamp the approval of each and every post should a customer want to keep tighter controls on their advisors than is necessary under FINRA’s rules. Preapproval of both static and interactive social media communications, however, requires tons of resources and a huge time commitment from firm principals and the compliance department. Such a policy would make widespread adoption by reps and advisors less likely and detracts from the timeliness of posts (and ultimately the business value that social media networks can provide). With FINRA’s clarification today, it is unlikely that many other firms will require that posts and tweets be preapproved.
More on the social media panel coming tomorrow.

Kevin Eversen and Ally Basak Russell at the FINRA Advertising Regulation Conference

To pre-approve, or not to pre-approve, that is the life insurer’s question

Yesterday Kevin Zellmer and I traveled to DC to participate in a rare opportunity: giving regulators our live feedback about the social media regulations they draft. The Compliance and Ethics Forum for Life Insurers (CEFLI) Social Media Summit Meeting was attended by regulators from FINRA, the National Association of Insurance Commissioners (NAIC), several state insurance commissioners, “middleware vendors” (aka us), and compliance executives from leading life insurance companies.

The morning started out with a brief overview and discussion of FINRA Notices 10-06 and 11-39 from the author of both: Tom Pappas. I applaud his willingness to attack social media head-on, accepting feedback that may shape the content of the next notice on social media and making the process of laying out these rules so transparent.
The most common questions on the Notices revolved around whether tweets and posts are static or interactive content. Like any lawyer worth her salt, I can make the case for either classification. By definition, content is static if it remains posted and visible to the public (unless someone takes it down); alternatively, content is interactive when spontaneously posted and meant to lead to a larger multiple-party discussion.
The problem with these definitions is that they blur in the realm of social media. On the Facebook Wall, for example, a running record of spontaneous (interactive) content is kept on the user’s account and is visible to the public. And, it stays on the Wall unless the user manually deletes it from the Page. But if they were to prohibit advisors and agents from posting spontaneously, regulators understand that they would be impeding the timeliness of posting, which inhibits the power of social media. On the other hand, this concern must be balanced against the risk that agents and advisors could abuse the opportunity to communicate with the public by misleading people into buying products or services that they don’t want or need.
I wasn’t the only one who wanted a firm answer to alleviate the confusion. Some participants confessed that they’ve decided to be even more conservative than the strictest interpretation of the rules require, to the point where they pre-approve every post or tweet that gets pushed out by their advisors. This necessitates a solid workflow tool like Hearsay Social to manage all those requests for approval, using a single sign-on vendor to avoid signing in and out of 20 different platforms and email accounts to resolve the approval request, and making sure the approval requests are addressed in a timely manner.
Other life insurance companies thought that approving every single post would be unfeasible, leading them to only pre-approve the initial Facebook profile content and then trusting their advisors to tweet and post responsibly. We’ve heard our competitors advocating a “first post” pre-approval policy, in which the profile and the first post, tweet, or status message ever posted on the Facebook, Twitter, or LinkedIn account would be pre-approved and all posts thereafter would not be pre-approved, but rather reviewed post-publication. I’m not sure how this type of policy advocates responsible posting. It seems arbitrary to me to approve the first post and no others, but I digress.
Another notable development involves the social media use of back-office operations professionals. As Clara and I predicted at the SIFMA Ops Conference, FINRA Rule 1230 was just passed to regulate professionals’ activities for broker-dealers. At the Summit Meeting, FINRA opined that not only will customer-facing reps’ business activity on social media be captured and retained, but so will operations professionals’ activity.
We then transitioned into a working session in which we could give the NAIC social media taskforce feedback on a draft of their whitepaper, titled “The Use of Social Media in Insurance.” This whitepaper is the beginning of a larger discussion that may turn into formal guidance or even model rules that the states can adopt.
Some of the issues facing the insurance industry are testimonials, whether or not to post disclosures for certain types of products or licensing information in each and every post versus simply posting the disclosure somewhere on the site, and who will be pre-approving static content (managers, the compliance department, etc.).
It’s still a work in progress, but we’re honored to have been present at the discussion. Many thanks to John Travagline and CEFLI for the invitation to present, and MassMutual, Northwestern Mutual, Guardian Life, and Kip Gregory for their candid presentations. We hope it’s the first of many such discussions in the future.

FINRA's New Social Media Regulations Interpreted [webinar]

On Wednesday I hosted a webinar to help clarify FINRA’s latest updates: Interpreting FINRA’s New Social Media Regulations: What Notice 11-39 and FINRA 2210 Mean for Your Firm and Advisors. We received a lot of excellent questions and, as promised, I’ve posted them for you. If you missed the webinar, send us an email and we’ll send you a copy of the recording and slides.
Can you give examples of static content versus interactive content according to FINRA?
FINRA says in Notice 10-06, “Generally, static content is accessible to all visitors to the site.” The best example of static content is Facebook, LinkedIn, and Twitter profile data: your name, hometown, age, university, place of business, etc. Static content is information that remains posted and visible to the public (or your Facebook friends only, depending on your privacy settings) until the user changes it on his/her account. The content in tabs, sidebar ads, and widgets can also be considered static content.
The clearest example of interactive content is Facebook’s chat feature: with Facebook chat, there is no running record of the chat visible to the public.
Facebook posts, LinkedIn status updates, and Twitter tweets are grayer area right now. We’ve heard FINRA panelists say that posts and tweets are static content because the Facebook “wall” or Twitter “feed” serves as a visible, running record of content so that it is available to the public even after the online conversation had ended. Notice 11-39 appears to support this position. However, if the FINRA Proposal to the SEC passes, classifying posts and tweets as either static or interactive will become a moot point because they will fall into the new Retail Communication category under FINRA Rule 2210. The new rule will have an exemption to the pre-approval requirement for retail communications posted on social networks:

“Proposed FINRA Rule 2210(b)(1)(D) would except from the principal approval requirements of proposed FINRA Rule 2210(b)(1)(A) three additional categories of retail communications, provided that the member supervises and reviews such communications in the same manner as required for supervising and reviewing correspondence pursuant to NASD Rule 3010(d).  These communications include: (i) any retail communication that is excepted from the definition of “research report” pursuant to NASD Rule 2711(a)(9)(A); (ii) any retail communication that is posted on an online interactive electronic forum; and (iii) any retail communication that does not make any financial or investment recommendation or otherwise promote a product or service of the member.”

Part of the rules say that a tweet or Facebook post might now be considered static content. Does that mean every tweet will need approval?
Yes. See above. We realize this can be cumbersome and thus, we welcome the rule change laid out above.
When are the proposed rule changes going into effect?
It’s unclear when the rule changes will go into effect. FINRA members and the public were allowed to comment on the proposed rules until August 24, 2011. The SEC will now consider all submitted comments and make its final determination on the proposal. Subscribe to our blog and we’ll be sure to let you know as soon as we know more.
Does Hearsay Social advocate that all “sharing” be controlled? What flexibility do advisors have to differentiate?
It’s not that all sharing should be controlled, per se, but that it should be pre-approved if necessary, monitored, and archived in accordance with FINRA regulations. Of course we advocate allowing your advisors to use their authentic local voices on social media, but this must be balanced against the risks of customizing content. This is where a good workflow tool comes into play. Corporate marketing can feed content to advisors, which the advisors can then customize and submit for approval to their principals.
For example, an advisor might post a wall message with a link to a New York Times article on wealth management with a comment about a key takeaway from the article. Or, an advisor might share a link to the new YouTube campaign that corporate is running.
What is the biggest risk you see with social content for the financial services industry?
I think the biggest risk is turning a blind eye to what your employees are doing on social media. Social media is viral by design. The ability to spread timely information quickly is both its greatest strength and weakness. While you cannot always control what is said about your brand, you can respond quickly and contain any negative sentiment before it gets out of control.
How do these regulations and proposed rule changes affect mobile device usage of social media?
Notice 11-39 clearly states that the device used to access social media sites is irrelevant to firms’ obligations to pre-approve, monitor, capture, and retain data. You must put a system in place to comply with the rules regardless of whether your advisors access social sites from the office, home, remote location, or mobile device.
Does the Hearsay Social platform include the monitoring of mobile devices such as Blackberries, iPhones, and iPads?
Yes. See above. Because Hearsay Social is API-based and serves as a portal, the transmitting device has nothing to do with the way we capture the social media data. We can capture and archive your employees’ business conversations no matter where they are, and we don’t need to access data from their personal accounts to do it. An API gives you a direct connection with Facebook, LinkedIn, and Twitter. When something changes in their applications, the APIs continue to work right along with them.
Conversely, a proxy is an application that sits between the two systems. It’s like a gatekeeper that decides whether or not to let someone in based on a set of rules. With a proxy, when something changes within the natives sites (i.e. Facebook, LinkedIn, Twitter), the proxy isn’t sure what to do because the rules no longer make sense. So, it stops working and leaves you potentially unprotected with holes in your data.
Can you provide an example of a customer using Hearsay Social in the insurance sector?
Yes- Farmers Insurance Group. They’ve deployed thousands of Facebook Business Pages with us. Farmers Insurance Agent James Peregrino is one “local” Hearsay Social customer. James estimates that 80% of his life insurance leads and 60% of his overall leads come from Facebook.
Missed the webinar? Send us an email and we’ll send you a copy of the recording and slides.