Debbi Corej, a vice president of Compliance at Prudential and one of the members of the FINRA Social Networking Task Force, was a guest speaker at a Socialware Webinar Tuesday moderated by Chad Bockius, Socialware CEO. It was an interesting hour.
Social media is everything that doesn’t come naturally to the investment industry—that is, it’s conversational, transparent, improvisational, experimental.
In order to force the square peg into the round hole, there’s a lot of work that needs to be done behind the scenes, as Corej comments show. What follows are excerpts from our notes but not a summary of all that was said. We encourage you to listen to a replay of the entire presentation.
Corej explained Prudential’s interest in social networking and the leadership role that Compliance is taking in setting the ground rules. Her comments were about what Prudential is doing at the enterprise level as well as at the broker-dealer level. At the broker-dealer level, social media is “on hold,” she said, pending resolution of how the regulatory requirements will be complied with.
“What we are trying to do is find a way to say yes,” said Corej.
What's Marketing To Do?
While listening, I repeatedly wondered what role Marketing is playing, not just at Prudential but at all investment companies in the process of sorting this out. I respect the communications risks and that Compliance et al are doing their jobs. They have an agenda and they’re jumping on it.
Still, I worry about the chilling effect as firms block social networking, blogs, microblogs, etc. that marketers can learn from, be inspired by, experience first-hand. And, it’s obvious that Compliance will get to business units about the risks before you in Marketing can get there about the opportunities. That can make it tricky for gaining support for social media plans, the best of which involve some calculated business risk-taking.
I comment on this not to resist the appropriateness of Compliance’s work but to be realistic about the job ahead as Marketing works on a customer-facing social agenda. This will be a test of your leadership. Armies of your colleagues are being mobilized to control the risks of social media participation. That's their job, this is something the firm must do.
Is becoming more social, better connected, more relevant also something that the firm must do? If that's what you believe, your job is planning how to encourage those same colleagues to imagine the business-enabling possibilities. Thinking big and different for your regulated firm will be an uphill climb.
The Risks Of Not Adopting Social Media
Prudential recently conducted a pilot with 10 registered reps using LinkedIn and she shared some of the lessons learned. LinkedIn, Facebook and Twitter are the social sites that Prudential will probably make use of but blogging, Corej said, is likely to be prohibited.
Throughout the conversation between Corej and Bockius, Corej stressed that Prudential’s thinking is evolving. “What I say today may be different 30 to 60 to 90 days from now through what we’re learning in our pilots and as we develop procedures.” Also, she said she’d expect the firm to enable additional “functionality” as it becomes comfortable with the various networks, the automation software and the use.
Indeed, a significant piece of the challenge of social media strategy development is the pace of change taking place on the very networks that asset managers and broker-dealers are in the process of trying to understand.
Corej volunteered what Prudential believes are the risks of not adopting social media:
- “We wouldn’t be taking full advantage of this important channel to get information about Prudential out there in a way that’s gaining credibility for a lot of different audiences.”
- “We’re in a better position to control the conversation about Prudential and not have others control it for us.”
- “We did not want to run the risk of not being forward-thinking with today’s generation of young talent. We want to be the employer of choice for today’s young people.”
Email Is Similar, Not Similar
Prudential wants to be conservative at first and will open up as they learn and grow, similar to their adoption of email, Corej said.
The high visibility and viral nature of social media gives Prudential more caution. Email can be one to one and one to many. Awareness that “social media could be one to millions with the push of a button” is what makes Prudential proceed slowly.
Unlike with email, social networks have content and activity implications, Bockius said. The activities of accepting a LinkedIn recommendation, liking a comment on Facebook and favoriting a tweet all have Compliance implications.
Personal Use Of Social Media Blurs Into Professional Use
FINRA has made it clear that the intention is not to “dig into” the personal side of social media. But if there’s reason to believe that business is being done in personal accounts, firms have an obligation to look for it and monitor for it. This is causing some issues and challenges, Corej said.
Personal and professional use of the same social media account is the source of some debate and concern, Bockius said. There may be an opportunity to work with some of these networks to establish multiple accounts, but today Facebook and LinkedIn make a point of insisting on a single account for a single identity.
Socialware is about to publish a survey on how financial advisors are using social networks and the extent to which they value the client and prospect information that’s shared.
Many firms fail to realize that LinkedIn is a social network and subject to FINRA Regulatory Notice 10-06 Guidance on Blogs and Social Networking Web Sites, too, Bockius said. (We, too, see firms that seem to have a LinkedIn blindspot and whose employees are participating without regard in group discussions.) Access without oversight is going to create problems, Bockius said.
Prudential Compliance, Law, Technology, Security, HR, Marketing and some business partners take part in cross-functional social media committees. A global enterprise social media policy was created and adopted. Each business unit needs to adopt its own policy, more restrictive than the corporate level. Each business has the option of saying that it doesn’t want to adopt social media and can adopt a policy to that effect.
A risk audit for regulatory and HR issues was conducted. When the policy was published, it was decided that social media was prohibited for broker-dealers until compliance issues can be addressed. The security systems identified all employees who were registered reps (licensed) and turned off all access from within the Prudential wall to social networking sites, professional social networking sites, blogs, microblogs, etc. Associated persons also were denied access.
Chief compliance officers and chief legal officers of each business unit are meeting with each business to develop standard policies and procedures. Training is being provided to make the officers aware of all of the issues, including demonstrations of what the functions are so business compliance officers can educate their business partners on the risks.
For the Prudential pilot, 10 registered reps were selected based on their agent history, and needed to be recommended and approved by their supervising principal. The supervising principal was a mandatory LinkedIn connection in order to be able to monitor the account. Templates were created for the account profile, with allowed and not allowed data elements. Certain functionality (e.g., recommendations) was prohibited for Human Resources and Investment Advisor reasons.
All LinkedIn communications were required to be printed. The supervising principal was expected to compare the print-outs and what they saw on LinkedIn, weekly at first and then monthly. Users who receive customer complaints via social media were required to report, per standard procedures.
Reps who connected with their personal contacts were told that they had to communicate with the contacts via their Prudential email address or Prudential Facebook account only.
When the pilot started, Corej said she was concerned that the controls put in place were going to be so cumbersome that social media would be discouraged, which was not the intent. But, supervising principals and reps both saw value in the pilot. The manual work, she said, helped identify the reviews and other questions. However, she said, the manual approach won’t scale.
At the time FINRA Regulatory Notice 10-06 was published (January 2010), FINRA said there was no technology solution that they knew of that would support compliance. Even where automation isn’t in place, firms are expected to comply, Corej noted.
Prudential is currently running pilots with a few automation vendors.