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FINRA spot-checking firms' social media activities for compliance

On Monday June 17, FINRA posted a notice on their website describing targeted social media audits they will be performing with some member firms. In this letter, which was delivered to select member-organizations for spot-checking, FINRA requests details about the firm’s social media accounts, who manages those accounts, as well as information about the firm’s social media policy and process.
Notable in this announcement from FINRA is that they are specifically reviewing the activities of top producing registered representatives. For firms that have primarily focused on social media compliance at a brand level and attempted to block advisor use, it may be an added challenge to identify social pages and activity for these reps. Organizations are requested to report on the top performer’s activity from February 4, 2013 through May 4, 2013 as well as the sales and commissions that each rep brought in during that period.
Audits like these are a great example for why an enterprise social media platform can be a valuable tool for regulated firms. With a solution like Hearsay Social in place, organizations have most of the requested information and reports at their fingertips. With a few clicks of a mouse, respondents to this spot-check should be able to pull a report showing the social media assets, users, and activity for a firm. In addition to information about social media usage and policies, FINRA requests “an explanation of the measures that your firm has adopted to monitor compliance with the firm’s social media policies,” a process that is simple to demonstrate with Hearsay Social as a system for continuously monitoring activity, archiving, and supporting compliant social-media usage.
You can read the full FINRA notice here.
If you are a Hearsay Social customer, please contact your customer success representative for support in the spot-check process.

Highlights from Hearsay Social Innovation Summit with heads of Merrill Lynch Wealth Management,, and Silicon Valley startups

We hosted the inaugural Hearsay Social Innovation Summit at our San Francisco headquarters last Wednesday, 2/27. The afternoon event brought together experts across fields to explore the rapidly changing technology landscape available to financial institutions. With the growing availability of social sales productivity tools, financial organizations must continue to innovate.

Fireside chat: Sallie Krawcheck (@SallieKrawcheck), Former President of Bank of America/Merrill Lynch, Wealth Management and Former CEO of Citi Wealth Management, and Hearsay Social CEO Clara Shih (@ClaraShih)

A heartfelt thank you to all of our customers, partners, prospects, and friends who joined us in-person, over the live stream, and on Twitter (#HSSInnovation) last Wednesday. In case you missed the event, here are recaps of the various presentations and panels:

Scroll down to see photos (even more photos available here) and tweets from the event as well. We look forward to seeing you at the next Hearsay Social Innovation Summit!

From left to right: WePay CEO Bill Clerico (@billclerico), Trizic CEO Brad Matthews, Simple CEO Josh Reich (@i2pi), CreditKarma CEO Kenneth Lin (@kennethlin), and Managing Director Chris Andrews (@cbandrews) from Northwestern Mutual

Clara Shih and Premal Shah (@premal), President of

Jonathan Lister (@jlisterca), VP of Marketing Solutions at LinkedIn

Attendees mingle at the Innovation Summit wine reception.

Heads of Merrill Lynch Wealth Management,, and Silicon Valley startups join Hearsay Social’s inaugural Innovation Summit on 2/27

See highlights from the Summit here.

Today we are excited to announce that on Wednesday, February 27 Hearsay Social will be hosting its inaugural Innovation Summit for financial industry leaders to discuss the future of financial services and relationship management in the social era.

Hailing from top banks (including Bank of America and Citi) and select Silicon Valley organizations (including LinkedIn, Kiva, and Hearsay Social), panelists and keynote speakers will convene at Hearsay Social’s San Francisco headquarters to discuss the impact of technology on traditional financial services organizations.
This afternoon event brings together experts across fields to explore the rapidly changing technology landscape available to financial institutions. With the growing availability of social sales productivity tools, these organizations cannot afford to be behind the curve; by participating in this event, they are committing to exploring the cutting edge of technology.
Speakers include:

  • Sallie Krawcheck, Former President of Bank of America/Merrill Lynch, Wealth Management and Former CEO of Citi Wealth Management
  • Jonathan Lister, VP Marketing Solutions, LinkedIn
  • Premal Shah, President, Kiva
  • Clara Shih, Founder and CEO, Hearsay Social

Following the Innovation Summit, Clara Shih will participate at the SIFMA Social Seminar in “A Conversation with Leaders of Social Media in Silicon Valley,” alongside Jennifer Grazel, head of category development – financial services, LinkedIn; John Ploumitsakos, director of online sales, Twitter; and Christine Trodella, global director, Facebook. The panel will be moderated by Steven M. Samuels, managing director, global advisor communications, Bank of America Merrill Lynch.
For those who can’t make it to the Summit, a live stream of the event will be available at the top of this page. You can also follow the conversation at #HSSInnovation.
We look forward to exchanging ideas with innovators from around the globe, helping the world’s largest organizations identify opportunities to leverage new technologies and build relationships in the social era.

Understanding FINRA 2210, the latest financial communications rule that affects social media

As announced last June, new FINRA Communication Rules, including FINRA Rule 2210 (Communications with the Public), will take effect February 4, 2013. Hearsay Social participated in the recent FINRA Communication Rule seminar held at SIFMA’s headquarters in New York where industry and FINRA experts including, Tom Pappas, Vice President and Director Advertising Regulation, provide detailed guidance and clarifications on the changes to the Communications with the Public Rule.
Some of the key topics covered by FINRA and industry experts included:

  • Changes to Categories of Communications
  • Principal Approval Requirements
  • FINRA Filing Requirements
  • Content Standards

Categories of Communications

FINRA has reduced the six different categories of permissible communications to the public to three. The three new categories are now broader in scope and are as follows: (1) Retail Communication; (2) Institutional Communication; (3) and Correspondence. All communications must now be coded as one of the three categories.

  1. Retail Communication: Any communication (including electronic) to more than 25 “retail investors” within a 30 day time period. This includes the majority of social media activity. Communications made to less than 25 retail investors fall under the Correspondence category.
  2. Correspondence Communication: Any written (including electronic) communication distributed or made available to 25 or less “retail” investors within a 30 day time period. *An important change to note for both Retail and Correspondence Communication is that the communication limit includes both existing and prospective customers.
  3. Institutional Communication: Any written (including electronic) communication that is distributed or made available only to institutional investors. Institutional Communications should not be made available or distributed to Retail.

Summary FINRA Communication Category changes active as of February 4, 2013

Principal Approval Requirements

At the seminar, FINRA reaffirmed existing exceptions from the requirement for principal pre-approval of Retail Communications and added the following three categories:

  1. Retail Communication that is excluded from the definition of “research report” (see NASD Rule 2711(a)(9)(A))
  2. Any Retail Communication posted to an online interactive electronic forum including social media. There is no requirement for the pre-approval of social media interactive discussions such as tweets and interactive posts. However, static content such as a LinkedIn profile must be pre-approved. — Hearsay Social has and will continue to offer pre-review solutions for organizations seeking an extra level of security. As always, the supervision and retention/retrieval of all social media communications are standard.
  3. Any Retail Communication not making financial or investment recommendations or promoting a product or service of the firm.

FINRA Filing Requirements

There are new filing requirements for communications after first use: structured type products; collateralized mortgage obligations; and closed-end funds.

*Exclusions from filing: Independently prepared article reprints and reports; Retail Communications posted on an online interactive forum including social media (previously considered Public Appearance and now categorized as Retail Communications); and Retail communications that do not make any financial or investment recommendation or promote a product or service of the firm.

Content Standards

  • Public Appearances–Under the new rule, disclosure requirements associated with recommendations apply to public appearances as well other Retail Communications. In addition, the presenter has to have a reasonable basis for making the recommendation.  The presenter has to disclose any conflicts of interest at the time of the public appearance, including if they have a financial interest in the securities recommended.
  • Promissory Statements- Expressly Banned! Hearsay Social can assist with establishing a Lexicon of promissory words such as “Guarantee”; provide surveillance and infraction mediation; and provide for pre-approval static content to avoid this violation by a Broker-Dealer.
  • Testimonials- Broker-Dealers and Regulated Firms must disclose that a testimonial is “paid” if the compensation value is more than $100.

Social Media Applicability

Although these updates may change the way we talk about communications, the general best practice for compliance on social media remain the same.  It is important for regulated firm or broker dealer communications to be truthful, not misleading and reviewed and pre-approved* when communications are related to financial or investment recommendations or otherwise promote financial products or services (*interactive forum not required).

Disclaimer: The material available on this blog is for informational purposes only and not for the purpose of providing legal advice. We make no guarantees on the accuracy of the information provided herein.

New proposed social media compliance rules announced by the FFIEC

On January 22 2013, the Federal Financial Institutions Examination Counsel (FFIEC) issued proposed guidelines entitled “Social Media: Consumer Compliance Risk Management Guidance” (Guidance).
In response to requests from industry and consumer groups, this policy document outlines potential social media risk for supervised entities (including banks, savings associations, credit unions, mortgage lenders, and other nonbank entities supervised by the Consumer Financial Protection Bureau) and provides guidelines for how organizations should manage those risks. Once finalized, supervised entities will need to follow the Guidance and the FFIEC will encourage state regulators to adopt the Guidance into law.
To get ahead of this change, such entities will need to ensure that their policies and practices on social media (LinkedIn, Facebook, Twitter, etc.) commensurate with the Guidance. Thankfully for many institutions addressing similar risks to FINRA, SEC and other regulations on communications, the FFIEC is another government agency confirming the need for oversight and control over financial institutions communications on social media. While this Guidance is more detailed than existing regulations, it addresses similar risk areas.

Key takeaways from the proposed guidance

Implement a social media policy & procedure
As part of their overall “Risk Management Program,” governed entities should have a clear and concise social media policy that includes a governance structure, outlines clear roles and responsibilities for all parties involved, and aligns social media with the strategic goals for the institution. The policy should also include an employee training program, identifying the controls in place for the use and monitoring of social media as well as procedures for audit and compliance.
At Hearsay Social, we encourage financial institutions to approach social media with a thoughtful combination of policy and technology. As suggested by the FFIEC in this Guidance, it is important that this policy outlines the strategic value of social media for the organization and how employees should use social media for business purposes.  The training and enforcement of this policy is almost as important as the policy itself.
Reporting of effectiveness of the social media program policy
The FFIEC requests regular reporting to the financial institution’s board of directors or senior management on the effectiveness of the social media program and whether the program is achieving its stated objectives.
As with any outbound initiatives, it is important for organizations to continually refine activities and measure return on investment.  With a software solution like Hearsay Social, financial institutions can easily monitor and measure their effectiveness on social media and report on compliance.
The covered institutions should have an oversight process for regularly monitoring social media posts, including those generated by third parties engaged to provide social media services for such institutions, to ensure compliance with all applicable laws and regulations.
Hearsay Social offers flexible governance solutions for organizations to build monitoring and review processes that meet their needs; as always, the supervision, retention, and retrieval of all social media communications is a standard requirement for FINRA and SEC governed organizations. For institutions seeking an extra level of security, Hearsay Social offers controls so employees can only publish pre-approved content to social media networks.
The FFIEC is requesting comments on the proposed Guidance. Specifically, FFIEC is seeking feedback on the following questions:

  • Are there other types of social media, or ways in which financial institutions are using social media, that are not included in the proposed guidance but that should be included?
  • Are there other consumer protection laws, regulations, policies or concerns that may be implicated by financial institutions’ use of social media that are not discussed in the proposed guidance but that should be discussed?
  • Are there any technological or other impediments to financial institutions’ compliance with applicable laws, regulations, and policies when using social media of which the Agencies should be aware?

Comments on to the proposed Guidance can be submitted to the Federal eRulemaking Portal by March 22. The Docket ID “FFIEC-2013-0001” must be included with the comment.
The Guidance can be found here.

Disclaimer: The material available on this blog is for informational purposes only and not for the purpose of providing legal advice. We make no guarantees on the accuracy of the information provided herein.

JFAM West: Financial services professionals build trust through social media

Trust is the most important factor to financial professionals when making their buying and partnering decisions, according to a recent survey.
With this conclusion, Daniel Rothman of the Financial Times set the stage for Friday morning at JFAM West, a forward-thinking event focused on how financial services marketing will transform in the coming months and years. Technology or not, trust always tops a financial professional’s wish list.
And yet, more and more professionals today rely on social media to establish that trust.
“Social media and the advent of mobile devices has fundamentally changed what people expect from businesses,” said Hearsay Social CEO Clara Shih. “We expect to be able to talk to our colleagues and friends before making significant decisions about what to buy and whom we choose as our financial representative or advisor.”
After her opening remarks, Clara sat on a panel with technology and marketing leaders from LinkedIn, BlackRock, Franklin Templeton, and Intuit to discuss how that fundamental shift is playing out.

For example, Eileen Loustau (Global Director, Social Media, iShares/Blackrock) shared that 89% of professionals said they are more likely to purchase a product based on their financial organization doing social media right. That’s an incredible statistic showing just how crucial the new channel has become.
Increasingly, panel participants agreed, the financial services industry must not just allow but actually expect financial representatives to share information online with their business partners. Hurdles to adoption, like compliance restrictions or the lack of tools, are slowly dropping away.
One technology breakthrough Matt Dunn (Director, Social Strategies, Franklin Templeton) and the other panelists especially showed interest in was “social signals,” messages and cues made on social networks that indicate life events, like the birth of a new baby, moving to a new home, or a job change. Such cues offer a tremendous opportunity for advisors to keep in touch with their clients and continue to offer financial guidance.
Explore our blog and website to learn more about compliant social sales and marketing for financial services.

Social media compliance updates from FINRA’s Advertising Regulation Conference

As announced last June, new FINRA Communication Rules, including FINRA Rule 2210 (Communications with the Public), have been approved by the SEC and will take effect February 4, 2013.  These rules, and related regulatory notices, provide important guidance for firms on blogs and social networking websites.
At the most recent FINRA Advertising Regulation Conference in Washington DC, Hearsay Social heard FINRA and industry experts provide useful updates and clarifications on Rule 2210 and social media compliance.
Some of the key topics covered include:

  • Pre-review requirements: Does a registered representative’s first social media post or their first interaction in a new conversation need to be pre-reviewed by their firm?
  • Deleting third-party comments: If a firm deletes third-party comments from its social media site, does that imply that it is has endorsed the remaining comments?
  • Third-party content: What are a firm’s obligations when a registered representative tweets a link from a business social media site to an article on an independent, third-party website?

Pre-review requirements

Across the financial services industry there has been an open question about whether dynamic content needs to be pre-reviewed. Reaffirming Notice 2210 at the conference, FINRA said there is no requirement for the pre-review of social media interactions.
The SEC-approved “Communications Rules” lay 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 group, Twitter feed, or Facebook page. Additionally, tweets and posts are not considered static content under 11-39 and therefore need not be approved.
Hearsay Social has and will continue to offer pre-review solutions for organizations seeking an extra level of security and as always the supervision and retention/retrieval of all social media communications are standard.

Deleting third-party comments

At the conference, FINRA representatives said that deleting a third-party post from a firm’s sponsored social media pages does not mean that the firm is endorsing the remaining comments. Firms are responsible for the supervision and retention of all comments, including deleted comments, but it is up to their good judgment in deciding which comments need to be removed.
It was also mentioned, however, that firms only deleting negative comments (and leaving all positive comments) could face repercussions. For this reason, comment deletion should be an action reserved for very specific scenarios in which the firm finds posts to be illegal, unprofessional, or inappropriate. The ability to delete concerning content is important for protecting a firm’s brand and to aid in this effort.
Hearsay Social offers real-time remediation functionality, automatically removing content that contains a specific keywords or phrases and maintaining a record of any deleted conversations after removing them from the public site.

Third-party content

In the case of a representative publishing a link to a third-party article, FINRA advises that the rep’s organization is responsible for the content in that article.  The organization is not responsible for the entirety of the content available on that site hosting the article, but it should be aware of what the specific article contains.
Hearsay Social offers a number of workflow and approval solutions that allow organizations to review articles and other content prior to being published by representatives of the organization.
The FINRA Rules, coupled with the information presented at the conference, indicate that the FINRA staff has a continuing and evolving grasp of the real-time nature of social media. We believe these updates allow organizations to better empower their employees on social media while remaining compliant.

Disclaimer: The material available on this blog is for informational purposes only and not for the purpose of providing legal advice. We make no guarantees on the accuracy of the information provided herein.

How do LinkedIn Endorsements affect financial advisors and representatives?

Does LinkedIn’s new Endorsements feature, which allows people to endorse the skills of others, present issues for Broker/ Registered Agents pursuant to Rule 206(4) of the SEC Investment Advisers Act of 1940?
Rule 206(4) states that advertisements cannot “use or refer to testimonials” (which include any statement of a client’s experience or endorsement). This is true of advertisements in print materials and advertising on electronic forums such as LinkedIn profiles.
An endorsement or recommendation from a client could be regarded as a violation of the Advisers Act.
SEC’s staff has consistently interpreted testimonials to include a statement of a client’s experience with, or endorsement of, an investment adviser. Therefore, we believe that through the use of “social plug-ins” such as the “Endorsement” feature could be a testimonial under the Advisers Act. If your organization concludes that such legal or compliance risks require monitoring or supervision of the new endorsement feature, the Hearsay Social platform can support that objective as described below.
LinkedIn Endorsements occur in two ways. The first is an endorsement on a LinkedIn skill that already exists in a member profile. The second is by a third party initiating an endorsement for a skill that does not exist on a member profile.
In the first case, it is not yet possible for a software solution to block a third party initiated endorsement on a pre-existing skill. If an organization does not want to allow skills and endorsements, however, we suggest creating a policy prohibiting representatives from adding skills to their own profiles. Organizations can monitor whether representatives stray from this policy through various software solutions like Hearsay Social.
In the second case, if a third party initiates an endorsement, the representative of your organization must accept this endorsement prior to it surfacing as a skill on their LinkedIn profile. If an organization does not want to allow skills and endorsements, we would encourage the organization to set a policy prohibiting representatives from accepting endorsements. Again, solutions like Hearsay Social can detect all newly listed skills on LinkedIn profiles.
Finally, for endorsements that may have existed prior to a policy being in place, we suggest that brokers and/or agents hide endorsements that already have taken place (see illustration below showing how to hide endorsements) and to use the Hearsay Social Compliance solution to identify anywhere these skills/endorsements may be listed.

As always, you should consult your own legal advisors as to the application, if any, of these or any laws or regulations restricting advertisements and other communications with the public to your business.

Hearsay Social handles skills and endorsements as we do all other areas of compliance, as this functionality is supported via the LinkedIn API.

If you have any additional questions about LinkedIn endorsements, please feel free to leave a comment below or contact us directly.

Disclaimer: The material available on this blog is for informational purposes only and not for the purpose of providing legal advice. We make no guarantees on the accuracy of the information provided herein.

Dreamforce recap: Financial firms can go social with the compliance officer's blessing

[Ed. note: Hearsay Social will be sharing extra details and compliance expertise in a special Dreamforce session today, September 19. This session, “Compliance and Governance for the Social Enterprise,” will take place in the Ralston Ballroom at the Palace Hotel from 3 — 4 PM.]

Hearsay Social representatives Kwesi Graves and Sanjiv Baxi at Dreamforce ’12 Financial Services Day.

By 2016, digital interactions with financial institutions will outnumber face-to-face interactions 250-to-1.
Brett King, bestselling author and American Banker’s Innovator of the Year (2012), shared this astounding statistic at the Dreamforce ‘12 Financial Services Day opening keynote, hammering home the point that banks, insurance companies, and other financial firms have no choice but to adapt to new social and mobile technologies.
It’s not just that children and young adults are growing up with smartphones and tablets. As a matter of fact, the most quickly growing demographic on Facebook right now is the 55+ age group. Across the board, your customers and prospects will increasingly expect you and your representatives to serve their needs in real-time over their platforms of choice, like LinkedIn and Facebook.
But what will the compliance officers think?
If you get compliance and legal involved from the outset, it’s true that they will have many questions and concerns, but no hurdle will be too high, according to Dreamforce speakers Adrian Mariadas (VP of Global CRM at Barclays Corporate) and Andrew Bartels (Director of IT at PSA Insurance & Financial Services). Be as open as possible with attorneys and compliance officers about your goals and methods, and they will more often than not be on your side.
Bartels even told the audience about how he put a white paper together for his compliance team, addressing all their concerns and laying out all the procedures in one concise document. In the end, his compliance team gave their approval to Bartels’ social media project.
Compliance, legal, and social media can all indeed get along.
After all, there are solutions (like Hearsay Social) that offer robust social compliance capabilities for FINRA, IIROC, and SEC-regulated financial firms. (And if you’re a customer, you’ll be pleased to hear that yesterday we announced Hearsay Social Cloud Compliance for Salesforce, letting organizations in regulated industries fully embrace the socially connected enterprise in the cloud.)
All told, things are looking very positive for the financial services industry on social media, as more and more of the most respected brands, like Allstate, Thrivent Financial, and Ziegler, lead the way in social media adoption for insurance agents, financial advisors, and wealth managers.
Have any questions about social media for financial services? Feel free to leave a comment!

[Ed. note: Hearsay Social will be sharing extra details and compliance expertise in a special Dreamforce session today, September 19. This session, “Compliance and Governance for the Social Enterprise,” will take place in the Ralston Ballroom at the Palace Hotel from 3 — 4 PM.]

Unveiling Hearsay Social Cloud Compliance for Salesforce at Dreamforce ‘12

With tens of thousands of people descending on San Francisco for Dreamforce ‘12, it couldn’t be a more amazing time to be working on next-generation technology in Silicon Valley.
We at Hearsay Social are especially excited today to announce Hearsay Social Cloud Compliance for Salesforce, enabling financial services, healthcare, and retail organizations to fully embrace the socially connected enterprise in the cloud while adhering to industry regulations and corporate governance.
Hearsay Social Cloud Compliance for Salesforce will soon be available on’s AppExchange, and includes FINRA, SEC, FTC, IIROC, FSA, and FDA compliance coverage across the Sales Cloud, Marketing Cloud, Service Cloud, and Chatter.
[Ed. note: Hearsay Social will have a booth all day today at the Financial Services Industry Day (at the Grand Hyatt) to discuss this announcement and more. Additionally, Hearsay Social will be sharing extra details and compliance expertise in a special Dreamforce session tomorrow, September 19. This session will take place in the Ralston Ballroom at the Palace Hotel from 3 — 4 PM.]

Hearsay Social Cloud Compliance for Salesforce

Fortune 1000 organizations are eager to embrace LinkedIn, Facebook, Twitter, Google+, foursquare, and Chatter, but they want to do so in a way that adheres to industry regulations and corporate governance. We know this because our customers have been asking for a seamless way to compliantly engage in the socially connected enterprise, and this is what we have delivered with Hearsay Social Cloud Compliance for Salesforce.
Ziegler, a full-service investment bank serving institutional, retail, and commercial clients, is one of the first Hearsay Social customers to enjoy the benefits of our new offering. Sid Bhatnagar, Vice President of Business Applications at Ziegler, has already called our new product “an essential component” of his social enterprise’s architecture.
Here are the key product features to expect from Hearsay Social Cloud Compliance for Salesforce:

Hearsay Social Compliance for Sales Cloud

Navigate social accounts, contacts, and conversations in a compliant manner. Hearsay Social Compliance captures and archives social conversations to help your organization comply with business records and communications with the public regulations set by various regulatory bodies in the U.S., Canada, and Europe.

Hearsay Social Compliance for Service Cloud

Maintain complete compliance while offering a world-class customer service experience. Hearsay Social Compliance automatically captures and archives customer communications as agents are assigned to and resolve cases on any of the social networks.

Hearsay Social Compliance for Marketing Cloud

Boost your brand power by aligning marketing messaging across the organization. Hearsay Social Compliance protects financial firms’ registered representatives from regulatory risk by retaining records of social media interactions deemed advertisements, which require pre-approval by a Registered Principal.

Hearsay Social Compliance for Chatter

Capture and archive conversations for business records and eDiscovery requests with Hearsay Social Compliance.

Learn more

If you’d like to learn more about Hearsay Social Cloud Compliance for Salesforce, be sure to visit our booth today at the Financial Services Industry Day (at the Grand Hyatt) or catch our presentation at Dreamforce tomorrow, September 19. The session will take place in the Ralston Ballroom at the Palace Hotel (directions below) from 3 — 4 PM. Or simply get in touch if you’d like to see a demo of our new product.