InvestmentsMar 16 2015

Do not shy away from social media

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This year already looks set to pile more pressure on the investment management community as both performance and principles face even greater scrutiny.

Since the financial crash, investment managers have been increasingly in the spotlight as investors challenge the fees charged and the real value of ‘active’ fund management.

A recent report from the think tank New City Initiative (NCI) also pointed to the burden of regulatory compliance as yet another headache for investment firms. The report – ‘How Regulation is Damaging Competition in Asset Management’, published last December – showed small and medium-sized investment firms feel hindered by regulatory costs, with many admitting they were reluctant to go it alone due to the complexities of compliance.

The advent of digital and social media and, more significantly, the resulting proliferation in communication and content channels is also proving taxing for businesses around the world.

In addition, with the Financial Conduct Authority (FCA) turning its eye to content management governance (following the publication of its initial social media guidelines), it is clear that the compliance conundrum will remain a real challenge for this sector.

All too often, expressions such as ‘compliance procedures’ and ‘data archiving’ are met with glazed looks, with good reason. Worse still, they can elicit fear among investment managers. But, in today’s digital world, with the FCA watching companies and their electronic communications more closely than ever, these terms need to be understood or even embraced, rather than avoided.

The reality is that archiving data and putting in place policies that can help businesses do this in a meaningful and cost-effective way is more straightforward than businesses think.

The starting point for any business has to be a social media usage policy. One of the critical steps in developing a sound policy is understanding the record-keeping and supervision regulatory requirements for social media.

The FCA has stated that it “recognises social media’s growing role in organisations’ marketing and communications strategies” and has even provided guidance on how to extend compliance programmes to this dynamic channel.

The regulators could be accused of stating the obvious. However, at least their actions go some way to recognising that it is the content of the communication, not the medium, that determines a message’s status as a business record.

The challenge from a regulatory perspective is how to keep pace with evolving technology and ensure that supporting guidelines are flexible enough to stay the course.

The bigger challenge for investment firms is to ensure that – once they know the ropes in terms of social media compliance – they focus on developing their own business content and style that focuses on their clients’ needs, so that they can reach their business goals more quickly.

There is a real opportunity for investment managers to capture the business benefits that social media affords and improve profitability while managing reputational risks. It is vital that investment managers feel confident about engaging with their clients through social media, but that will be possible only with the right amount of preparation and careful attention to detail.

Many businesses still assume that using social media will be too complicated, time-consuming or risky for them. But there are simple steps to follow to align social media and business goals while still meeting regulatory obligations.

At the heart of this is effective relationship management: something investment managers have built their very businesses around. Developing an effective social media presence is no different.

Businesses need to collaborate through and around social media. There needs to be policy development between the regulator and firms. And within organisations too, there needs to be effective communication between departments. Rather than operating in silos, IT, marketing, and compliance departments all need to be talking to each other with respect to policies and compliance supervision.

Social media compliance boils down to three simple steps: developing the right policies (that everyone is aware of), training all stakeholders and implementing an effective archiving solution to manage it and automate the process as much as possible.

James Thompson is regional director EMEA at Smarsh UK

ADOPTING AND GOVERNING SOCIAL MEDIA: BEST PRACTICES

Implement up-to-date regulatory guidance

Have a detailed, reasonable social media policy in place and review all applicable guidance notices to ensure your organisation’s policies and practices reflect them. Your policy is an active document, signed by your organisation’s representatives, that outlines:

• Exactly how and why your representatives may use social media.

• Which social media platforms and accounts can be used for business purposes.

• Who is authorised to use your organisation’s social media accounts.

• How social media activities are monitored.

• How your social media policy is enforced.

Train employees on social media policies

Your advisers need to know your organisation’s official social media policy and receive training on how to use social media in accordance with your rules. Ongoing employee training is a must, since social media platforms and practices change rapidly and regulatory guidelines evolve quickly. Key training topics include:

• Personal versus business social media.

• Which social media messages need to be approved before posting.

• Which messages need to be reviewed after posting.

• How to manage third-party social media content.

Supervise and archive social media activities

An archiving solution will enable your organisation to capture official records of posts and to search, supervise and produce those records in their original format when necessary, such as during an audit or examination. You’ll want to archive and monitor content from your organisation’s approved accounts on all of your different social media platforms and accommodate new platforms as needed.

Your compliance team also needs to demonstrate they’ve reviewed your organisation’s social media posts, documenting who has evaluated and approved each post. Make sure you can track the life cycle of each social media message, including the exact date and time it was created (or deleted), and the precise actions taken by the organisation if a message is escalated during review. An automated audit trail can help substantiate and document social media review actions taken and provide evidence in read-only format that supervisors enforce policies.

Source: Smarsh