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The Rise of Content Calls for Regulatory and Policy Changes: Insights from FINRA Annual Conference 2015

FINRAACThe financial services industry is clearly undergoing a period of rapid change. At FINRA’s 2015 Annual Conference, key topics of discussion centered on changes surrounding digital content and supervision strategies — which came as no surprise given the proliferation of content and digital communication channels in recent years.
Even today, people around the world are sending roughly 183 billion emails a day and sharing another 1.5 billion photos. This ever-increasing volume of content is having a big impact on regulation as a whole, as well as financial industry regulators who are required to review, monitor, record and retrieve content.
In the session “Top Technology Challenges,” panelists from both large and small firms with diverse business models led the audience through a conversation on the top tech issues facing broker-dealers today, mainly the challenges around communication channels and the required supervision and record keeping we’re all familiar with. Of note, text messaging and the lack of adequate supervisory tools is a big area of concern. This, in combination with Bring Your Own Device “BYOD” programs at firms has compliance professionals concerned about limited ability to supervise advisor-client communication.
Joe Nadreau, Managing Director of the Innovation and Strategy Group of Wells Fargo Advisors shared that they still have to find a better solution for mobile communications, so that their advisors “can communicate with clients the way they want to communicate.” Participants agreed that they can control some of this communication via policy, but that the industry needs to find a better technology solution.


Another challenge is that even advisors with the best intentions can sometimes accidentally break the rules. One example that was shared is when a client, who is also a personal contact, reaches out to an advisor using their personal email or phone number. Joe shared that they caught an advisor who had received work emails to his personal email account and the panelists agreed that this type of breach of policy is a concern, but they have limited way to monitor for it.
With the large volume of communication types that firms are now supervising, the supervision/compliance technologies are also causing areas of concern. The panelists discussed “vendor fatigue” and the issues caused by having multiple systems for compliance review and record keeping.  Jim Webb, Principal and CEO of Cape Securities had such issues with the technologies they were using that they custom built a solution to meet his firm’s needs.
While some of the larger firms discussed looking to large technology companies, (like Apple or Facebook) to drive their technology, it was noted that smaller organizations actually look to the to the larger firms, such as Wells Fargo and Pershing (who were on the panel), to drive innovation and technology decisions. The smaller companies don’t have as much power to influence technology or policy, so they rely upon the larger organizations to influence technology roadmaps provide example use-cases.
In the session, “Communications with the Public: Rule Retrospective and Beyond” representatives from FINRA Tom Pappas and Joe Savage participated on a panel with Rajib Chanda, Partner at  Simpson Thacher & Bartlett LLP and Alex Gavis, SVP and Deputy General Counsel FMR/Fidelity Investments where they discussed key takeaways and changes from the Retrospective Rule Review on Communications with the Public. Referring also to this report, a majority of respondents said FINRA should provide increased flexibility and clarity on the application of its rules to social media and mobile communications.
In addition, there was a lot of discussion on the types of content that must be filed for review and what type of changes require re-review.  Regulatory Notice 15-16 was released in response to the Retrospective Review. One type of content they discussed was templates, clarifying that they did not require filing.


Another key takeaway from this session was how receptive FINRA was to exploring better ways to address the disclosure requirements as technology changes. Pappas discussed a variety of options for displaying disclosures and agreed that in today’s age of ever-changing technology, disclosure requirements can be met with a hyperlink, QR code or “info” button. Many of the rules around disclosures were created before the mobile web and social were as prevalent as they are today. And, this evolution of devices and access points, from desktop to laptop to mobile, is making it critical to stay current and revisit how disclosures are displayed.


With disclosures, it was discussed, that firms and advisors must keep the customers in mind.  The goal is to encourage client understanding and awareness, and so, as we consider how they are displayed, we must keep this in mind.


Download our free guide on US Social Media Compliance.
View additional highlights of the 2015 FINRA Annual Conference.
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Technology and collaboration key to restoring consumer confidence and trust in financial markets: Recap from the 2014 FINRA Annual Conference

finra stock photoOnce again Hearsay Social was proud to participate in the 2014 FINRA Annual Conference in Washington, D.C.

Regulators from FINRA, the U.S. Securities and Exchange Commission (SEC), and the Financial Conduct Authority (FCA) joined financial leaders from leading organizations including AXA, Wells Fargo, LPL Financial, and Barclays to discuss the evolving economy and financial markets.

In his opening remarks at the conference, Richard Ketchum (Chairman and CEO, FINRA) echoed the same themes discussed at the SIFMA Compliance and Legal Society event in Orlando earlier this year: namely, the need to restore investor confidence and trust in the securities industry.

Furthermore, the Economic Confidence Index (ECI), which averages how Americans rate current economic conditions with their expectations for the future, shows that things are not improving quickly. One in five Americans graded the U.S. economy as weak, according to recent figures, while 34 percent rated it as poor. Additionally, while 39 percent of Americans said the economy is improving, another 56 percent said it is getting worse. Although the markets have recovered, people haven’t.

That’s hard to believe considering that it’s been seven years since the credit crisis affected housing markets and six years since the 2008 market plunge. The last market collapse, however, is still vivid in our collective memories, creating a crisis of confidence among investors.

How are we to turn the tide, and what is the prescribed solution to restore trust in the securities market? The answer may lie in embracing new technology and collaboration.

The new age of regulation puts the investor first, and FINRA is determined to be a key engine in restoring trust in the securities markets. According to Ketchum, today FINRA’s risk-based exam program is more data-driven: they are collecting more information electronically weeks before a scheduled exam and using available technology to better manage and analyze the data.

Using a Risk Control Assessment (RCA) and regulatory intelligence in the “High Risk Broker Program,” FINRA is speeding up and improving the efficiency of its exams. To improve and promote investor confidence, FINRA focuses on a strong set of organizing principles:

  • To be data informed,
  • To be technology empowered,
  • To be responsive to change, and
  • To be capable of more quickly and effectively identifying and disciplining bad actions.

The Comprehensive Automated Risk Data System (CARDS) is an important next step to fulfill these principles and is designed to provide swift and responsive action.

“With the technologies that are now available to us,” explained Ketchum, “we can do things to transform our exam program in ways that haven’t been available to us before. And frankly, it would be unconscionable not to embrace these technological advancements to better fulfill our investor protection and market integrity mission.”

That said, the collection and management of data to identify trends and possible risks has been met with controversy and concerns regarding, costs, control and the security of such a large database. FINRA received approximately 800 comment letters about it.

Despite the controversy, it’s a step in the right direction for FINRA to be using the most advanced technology solutions, investing resources, staff, and time to restore investor confidence and trust in the markets.

I believe Ketchum when he says that they value member firm engagement and that their message and outreach for feedback is genuine and driven to “get it right.” I also believe that social media and networking activities by member firms will play a much larger role in improving and restoring the confidence that has been lost. Social is built on the core principles of authenticity and transparency–values that are key to rebuilding trust. A connected and trusted advisor is one that is open to share and provide guidance in times of uncertainty, helping clients navigate their financial resources to meet their objectives.

FINRA cannot do it alone, however, and it will require the collaboration and partnership of member firms and evolving technologies to get it right. As Ketchum states in the conclusion of his keynote presentation, “Our interests are aligned, and putting the investor first is a goal we should have in common. The investing public deserves nothing less.”

I agree.
Read Ketchum’s full comments from the FINRA Annual Conference and learn more: