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Webinar Recap: What Investment Firms Need to Know about Social Media Compliance

By Jessica Sipprelle,
Thursday, May 2nd, 2013

Yesterday, we hosted a webinar, “Going Social: What Investment Firms Need to Know about Social Media Compliance” along with Global Relay, an Eze Castle Integration partner and provider of enterprise message archiving and monitoring services. Global Relay's vice president of sales, Bryan Young, and our own vice president of marketing, Mary Beth Hamilton, discussed a range of topics including the changing SEC guidance on social media, compliance requirements for hedge funds and key components of instituting a social media policy at an investment management firm. Read on for a recap of the event.

Bryan Young vice president of sales global relaySocial Media Trends

In recent years, social media usage has expanded rapidly in the business sector. Of the various social media offerings currently available, Twitter, Facebook and LinkedIn tend to be the most widely utilized within business settings. Reasons for connecting through various social networking websites range from a desire to keep in touch with friends and family to researching products and services and keeping up with news. Social networking comprises a huge portion of the time spent online, with 25% of all time on the Internet spent on these websites. Furthermore, not only do social media users access these platforms via their computers, but 40% also visit social media sites via mobile devices. Additionally, social media applications are now the third most utilized by smartphone owners, an essential statistic for companies to keep in mind when crafting their social media policies.

Social Media and the Investment Industry

In the past, the investment industry largely avoided social media. However, more recently, many firms have begun to embrace the various social media platforms. Earlier this year, the SEC released a guidance update on social media usage, as well as a statement indicating that social media platforms are acceptable vehicles for investment firms to use for communications with the public. Leading this move towards social media is Goldman Sachs, who created a Twitter page in 2012 which now has 44,000 followers. Today, up to 50% of financial advisors now use social media to communicate with clients and other stakeholders. However, the rules and regulations regarding social media usage by investment firms continue to be highly complex, causing some hedge funds to continue steering clear of these sites.

social media word cloud cube

Currently, only 1% of hedge funds are actively taking advantage of Twitter’s offerings. Despite this, firms' employees are increasingly using social media platforms on their own, which is why it's becoming more and more important for firms to develop a social media usage policy to govern these online communciations.

Here at Eze Castle, we're seeing hedge funds handling the changing regulatory landscape regarding social media in the following ways:

  1. A small percentage of firms take the approach of completely blocking all social media use by employees.

  2. Some firms take the approach of blocking just the communications side of social media sites in the workplace.

  3. A large number of firms do not limit social media usage at all.

How do regulators view social media?                                                              

In the eyes of regulators, social media is viewed in the same regard as other forms of electronic communication. The SEC has deemed social media a suitable platform for distributing public information, as long as the public is directed where to look for it. Specifically, social media falls under the existing “media-neutral” requirements, including the following:

  • Record Keeping. Firms must be able to capture and preserve all electronic business records.

  • Supervision. Firms must supervise and enforce supervisory policies.

  • Audit Readiness. Firms must consider their preparation for an audit when producing data for auditors.

  • Social Media Specific. Before engaging with social media, firms must be certain that they have the technology required to record and retain their communications.

However, there are also some key differences to be aware of when it comes to social media communications. These include:

  • Static Content. Static content is content that remains posted until changed by the firm or individual, and is accessible to all website visitors. This type of content -- including initial tweets, Facebook wall posts and LinkedIn network updates -- necessitates principal pre-approval.

  • Interactive Content. Interactive content is considered real-time communication and requires supervision after the fact, on a risk basis. This type of content ranges from emails, IMs and Facebook wall comments to LinkedIn network comments and retweets.

  • Linking to Third-Party Content. When linking to third-party content, firms are responsible for the content of linked sites and what reps endorse. It is vital to be aware of the fact that “linking” or endorsing can trigger entanglement principles. Examples of this include Facebook “likes,” Twitter “retweets” and LinkedIn “recommendations.”

Mary Beth Hamilton vice president of marketing eze castle integrationPersonal vs. Corporate Information

Even as some investment firms are still steering clear of social media, there is an increasingly indistinct boundary between the personal and professional realms of social media usage, especially with the rise of LinkedIn. Social media platforms such as LinkedIn also pose further challenges to firms because, unlike email, employees own and control most social media accounts. One way to handle this challenge is to require employees to opt in for social media archiving. To protect employee privacy, firms must ensure that employee passwords will not be shared. Also, firms must ensure that their social media compliance solution covers content originating from mobile devices, home computers and public computers.

Best Practices for Creating a Social Media Policy

When crafting a social media policy, investment firms should use the following three questions to frame their approach:

  1. Is it appropriate or necessary for employees to visit social media sites such as Facebook, LinkedIn or Twitter during the work day?

  2. Are employees considered to be representatives of the company in their online interactions?

  3. Is it the firm’s responsibility to limit or control what employees are able to access on the Internet while at work?

There are also a variety of other considerations that go into drafting a successful social media policy. These include:

  • Representation. Employees must not represent their opinions published through social media channels as those of the company. If an employee has chosen to document his or her relationship with the firm, he or she must take care to guarantee all online actions and opinions reflect those of the firm.

  • Defamation. Employees must not defame or post any type of abusive content online, under any circumstances. The firm policy should clarify that any such actions will result in disciplinary action for the offending employee.

  • Responsibility. Employees must exercise strong judgment whenever using the Internet, and should expect to be responsible for any liabilities that arise from their online interactions.

  • Time. Employees should be sure that their social media interactions do not become so time consuming that their work performance is negatively impacted.

  • Record Keeping. If employees choose to communicate through social networking sites, firms should implement social media archiving technology such as the solutions provided by Global Relay to ensure compliance.

  • Regulations. A company’s social media policy should reflect the current regulatory requirements.

For more information on social media compliance for investment firms, contact an Eze Castle Integration representative. In the meantime, check out the full replay from our webinar, “Going Social: What Investment Firms Need to Know about Social Media Compliance” featuring Global Relay.



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Categorized under: Hedge Fund Regulation  Security  Hedge Fund Operations  Trends We're Seeing 



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