How to accomplish social media compliance in financial services

James George, Compliance Manager at Compli-Serve SA.

There’s no denying that social media is no longer just a nice to have. It’s a required part of many marketing strategies in any industry, including financial services.

Banks are meeting their clients’ real-time response expectations by using social media and mobile apps. Boutique asset managers are spotlighting their senior executives and portfolio managers through Twitter, and compliance practices have also started putting compliance issues on the agenda via social media platforms.

Companies that choose to remain on the side-lines could find themselves at a competitive disadvantage and, worse yet, mired in costly legal and regulatory conversations that slow down operational efficiency. Social media is fast, effective and the way of the future.

Where compliance fits in

In a financial services firm, it’ll become important for the marketing team to work closely with the compliance team and prove that they have a strong understanding and respect for any social media regulations.

After launching your programme, include senior management in regular marketing meetings so they can continue to learn and see the value of social media and be a part of the planning process going forward. It’s important to continue employee training sessions and share your progress, such as highlighting successful campaigns, appropriate responses and what not to do.

Potential legal issues

There is no current legislation dealing explicitly with social media in South Africa. One needs to look to other statutes and to common law to determine social media law.

Forester Research in the US states that there are five common categories of requirements that organisations should pay attention to.

• Data protection and privacy

One of the biggest social media risks is the disclosure of company confidential information, trade secrets, know-how and other proprietary information. The common law does incorporate an implied term of confidentiality into every contract of employment and most employment contracts do have confidentiality clauses in them.

• Employee rights

Approximately 75% of U.S. and EU web-connected adults are accessing social networking sites regularly. This means that employees in virtually any industry are likely to use social media in some form, which drastically increases a company's exposure to potentially negative branding and reputational risks. If an employee, for example, tweets in his or her own personal capacity, in theory they should be able to say what they like, but being associated with the company online could then wreak havoc for your brand if your employee says something that could be misconstrued as unconstitutional.

• Disclosure and third-party endorsement

A difficult issue posed by social media is how to communicate sensitive, often complicated messages with limited words. A company should be aware of any social media regulations and compliance challenges that pertain to its industry.

• Governance and oversight

Employees across organisations are leveraging social media to enhance customer relationships, improve team collaborative efforts and strengthen lead-generation efforts. It is important that organisations develop proper internal procedures and controls to ensure that associated risks are managed effectively.

• Information archiving and record retention

Social media also presents new challenges for organisations that are required to retain records of all business communications. One needs to ultimately determine the appropriate context of business communications first, and then decide which devices and applications employees are permitted to use and under what circumstances an employee may communicate with clients.

How South African courts will deal with issues arising from social media usage is still, to a large extent, uncertain. There have been various local social media scandals already, but what’s happening abroad is useful as it gives us an idea as to the types of questions and risks we are likely to face. By keeping an eye on the international social media landscape, your company can be prepped to remain compliant.