Thursday, October 19, 2017

Social Media – Will the Regulators Do Spot Checks?

Posted by Sharon June 25, 2013 12:23pm

Photo Credit: ctoocheck

I found out today that the Financial Industry Regulatory Authority (“FINRA”) is doing social-media compliance spot checks on some of its member firms.  In a notice posted Monday on FINRA’s website, the regulator said it wants broker-dealers to identify the sites used by a firm, as well as all individuals who post or update the firm’s content on social-media sites.  FINRA is also asking for a list of the top 20 producing registered representatives at the targeted broker-dealers who used social media to interact with retail investors.  In addition, firms are being asked to explain how they monitor compliance.

If FINRA is doing spot checks, it might not be long before regulators start doing spot checks as well.  If your institution uses social media, you should make sure you have controls in place to monitor your social media.

The following is a request list from FINRA’s Advertising Regulation Department that requests firms provide the following:

  1. An explanation of how the firm is currently using social media (e.g., Facebook, Twitter, LinkedIn, blogs) at the corporate level in the conduct of its business. Please be specific as to the business purpose of each social media platform as it is used by the firm.
  2. Please provide the following with respect to the firm:The URL for each of the social media sites used by the firm at the corporate level, the date the firm began using each of the sites identified above, and the identity of all individuals who post and/or update content of the sites identified above.
  3. An explanation of how the firm’s registered representatives and associated persons generally use social media in the conduct of the firm’s business, including the date(s) the firm began allowing the use of each social media platform and whether such usage continues.
  4. The portion of your firm’s written supervisory procedures concerning the production, approval and distribution of social media communications.
  5. An explanation of the measures that your firm has adopted to monitor compliance with the firm’s social media policies (e.g., training meetings, annual certification, technology).
  6. A tabular list of your firm’s top 20 producing registered representatives (based on commissioned sales) who used social media for business purposes to interact with retail investors as defined in FINRA Rule 2210(a)(6). Please identify the type of social media used by each individual for business purposes during this time period. Please include the individual’s full name and CRD number, as well as the dollar amounts of sales made and commissions earned during the period.

I thought this was interesting.  While I have not heard word of the OCC or FDIC performing spot checks, it doesn’t mean they won’t start.  It may be better to be prepared ahead of time having performed your own due diligence and monitoring.

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Sharon Geiger

Quality Control Specialist

Sharon Geiger, Quality Control Specialist Sharon has 27 years banking experience, 21 of which have been involved in internal audit. She has extensive knowledge of all aspects of the banking industry, with a particular emphasis on regulatory compliance and identifying risks and controls. As QCR Specialist, she performs Quality Control Reviews to ensure all workpapers and reports are completed in compliance with the firm's standards.



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