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THREE REASONS WHY ADVISORS FEEL REGULATORS MAKE SOCIAL MEDIA DIFFICULT

So, do regulators make social media difficult for financial professionals to use? Many advisors certainly believe so, even if it's their own compliance officers who are raising the bar through restrictive in-house rules. Charles Schwab's vice president of compliance communications Melissa Callison said in an interview for this book that regulators have “tried to make expectations clear, but it's extremely complex because you're dealing with third-party sites, and they aren't always cooperating.”

Consider some of the issues that make it hard for the industry to view regulators as friendly to social media in general, and to the way financial professionals use it in particular:

■ Old Rules for New Media – Many of the existing rules go back to the 1930s and 1940s, an age where social media was a fit subject for science fiction. The SEC's latest pronouncements for advisors on testimonials and social media were more enlightened than many expected.[1] But many industry pros feel they have to manage a modern approach to communication with many old rules.

■ Regulatory Reputation – Some industry leaders believe regulators are concerned about how they look in the new social media world order as they work their way through investor protection. As a result, “They're unwilling to give anyone a sort of pass for anything that happens on social media,” says Theresa Hamacher, CEO of NICSA, a sponsor of online forums for the global investment management community.

Layer upon Layer – Adding to the complexity of rules and guidelines that have existed for decades are new rules and oversight activities, such as spot-checks of advisor activity on social websites. Some advisors feel it only compounds the difficulty of having simple-to- use systems in place.

Faced with the challenges of serving client interests in the wake of the 2008 financial crisis, advisors often see compliance as one more obstacle to overcome.

  • [1] SEC, Guidance on the Testimonial Rule and Social Media, March 2014, sec .gov/investment/im-guidance-2014-04.pdf. Accessed May 15, 2014.
 
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