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Tag Archives | Compliance

Why Social Media Archiving is a Must Have for Financial Services

Ever since social media first came into our lives with the emergence of platforms like MySpace in the early 2000s, it has shown no signs of slowing down. Today, over 30% of the world’s population utilizes some type of online community. In the U.S, that number amounts to 73%. Facebook itself has more active users than China’s entire population of 1.40 billion! While social media offers the benefits of extended reach, flexibility and freedom as a means of communication, financial services firms can find themselves at serious risk if they fail to archive social media content like other business communications. 

Why social media archiving is a must-have for financial services

Organizations across industries have jumped on the opportunity to use social media as a tool for branding, customer service, and sales –  with a projection that digital sales could account for more than 40% of new inflow revenue within the next 5 years. One industry experiencing particularly high returns on the investment in social media is the financial services industry, with year-to-year growth averaging 31%. In a recent survey, 79% of Financial Advisors said they had successfully acquired new clients through social media.

While social media offers the benefits of extended reach, flexibility and freedom as a means of communication, financial services firms can find themselves at serious risk if they fail to treat social media like other business communications, equally subject to regulatory laws by FINRA, SEC and FDA, including but not limited to:

Rule 17a-3 and Rule 17-a4

In a recent regulatory notice concerning blogs and social networking sites, FINRA stated that firms must retain records of all business-related electronic communications to remain compliant with Rule 17a-3 and Rule 17a-4 under the Securities Exchange Act of 1934 and NASD.

Rule 17a-4(b)

The SEC issued a rule that requires firms to keep records for business communications made via social media, even if only distributed internally. It also stated that broker-dealers must preserve records for a period of not less than three years, with the first two in an easily accessible place.

Rule 4511

This law requires organizations to preserve records under FINRA and SEA rules, in a format that complies with SEA rule 17-a. It also requires record preservation for 6 years

Regulatory Notice 10-6 and 1139

These laws focus on issues relating to FINRA members’ use of social media, including record-keeping, supervision and responding to third-party posts and links.

Failure to comply with these regulations can result in hefty fines, bad publicity, and ultimately loss of business. In April 2015, WealthForge, LLC was fined $20,000 for failure to use an  adequate supervisory system that captured, reviewed and retained social media communications used by its representatives.

Later in the year, Scottrade Inc was fined an astonishing $2.6 million for failing to implement a supervisory system or retain securities-related electronic records in the required format stated by the rules.

While there are a few options for collecting the required records for compliance, social media archiving is the most relevant technology solution that automatically monitors specified social media feeds and archives all activity associated with that feed. It also provides authentication, so that the record can be verified. Financial Services firms are in dire need of social media archiving technology; and as new rules continue to come into play in the future, they simply cannot afford a delay.

PageFreezer is a leader in the online archiving industry. We’ve been developing our state-of-the-art cloud-based system since 2010, helping over 500 clients including financial firms, multinationals, and government agencies meet their compliance requirements. We know the rules inside and out, and have the technology and systems for easy, simple, affordable social media compliance.

Archiving for FCA Social Media Compliance

In March 2015, the FCA (the UK Financial watchdog, The Financial Conduct Authority) issued compliance guidance for how financial firms can use social media:

FG15/4: Social media and customer communications: The FCA’s supervisory approach to financial promotions in social media

The_City_London2It’s twenty pages long so, as with any government financial document, chock full of specific details. Obviously, if you’re in the industry, you (or probably your compliance officer) should absorb it all. Today though, we’re just going to focus on the archiving part; the requirement to keep accurate records of who said what, when.

Section 1.25 cuts to the heart of the matter:
Firms should also keep adequate records of any significant communications. As well as helping to protect consumers, these records enable the firm to deal effectively with any subsequent claims or complaints. Firms should not rely on digital media channels to maintain records, as they will not have control over this: social media in particular may refresh content from time to time, with the consequent deletion of older material.
In other words, use an archiving service. While you might see that as a self-serving statement, it’s none the less true. Social media archiving services have the processes, technology and knowledge to ensure you have these records in place (without the need to develop everything in house).

Financial Communications – Promotional or non-promotional?

In general, when using social media financial firms will have two types of communication; promotional and non-promotional. As the non-promotional communications do not involve a financial aspect it’s a non-regulated activity and do not require archiving.

However, anything that even has a hint of financial promotion probably falls under the regulations and thus needs archiving. Anything that “includes an invitation or inducement to engage in financial activity” is considered promotional. Be careful, a few words can turn an otherwise non-regulated communication into something that now falls under compliance.

Personal, or in the course of business?

Another factor is ‘in the course of business’. Are you communicating as a person, with your personal views? Or, are you communicating for business? Ensure there’s clarity, so that no one can mistake one for the other.

Just because it’s a “new” medium doesn’t mean that the old rules don’t apply. All the previous rules for factors such as misleading statements, clarity, and fairness are still in place. You need to consider the medium and the intended audience; disclaimers, emphasis and balance all need to be taken into account.

The guidelines go through many examples, showing what is compliant and what is non-compliant. By understanding these examples, and having proper internal policies and procedures in place, UK financial firms don’t have to be afraid of social media. Just make sure everything (including proper social media archiving) is in place BEFORE you start Tweeting and Posting!

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FOIA – Preservation and Presentation

Prevention of “Willful, Intentional and Bad Faith Violation of FOIA” – Preservation and Presentation.

Freedom of Information, in the United States, refers to the legislation guiding bodies of information at the federal level and independently within the fifty states. Subject to the Federal Freedom of Information Act, 5 U.S.C. s. 552 (FOIA) there is an onus on executive branches of government agencies to fully or partially disclose previously unreleased information or documents in the government agencies’ possession to the public.

In addition to the making available of relevant documents, such agencies and bodies are subject to sanctions for delaying or hindering the process of access to information. One must note that exceptions to this act currently exist, and the Federal Government’s FOIA is different in parts to varying FOIA or Open Records Laws passed by individual states.

Various amendments and extensions have been added since the enactment of the FOIA in 1967, to include the Electronic Freedom of Information Act Amendment 1996 (E-FOIA), ensuring the making available of electronic records (within 20 business days of notice), the 2010 repeal of FOIA Amendments in Wall Street Reform Act, and the proposed FOIA Oversight and Implementation Act of 2014.

Case Study: Better Government Association v. Elk Grove Village
Though heavily influenced by and subject to federal law, the provisions on access to information within individual states vary considerably, with certain states providing more pro-access freedom of information laws, and others more ambiguous in their nature, but all in line with open government standards to facilitate access to public records to the public.

In a pending case, a suit was filed by Illinois-based government watchdog, the Better Government Association (“BGA”), suing governmental body Elk Grove Village (“EGV”) for refusal to respond to an FOIA request for records and footage of a recorded village board meeting in an appropriate manner. The Defendants refused production of documents and a video, and directed the Plaintiff to their website, resulting in what the Plaintiffs claim to be a “wilful, intentional and bad faith violation of FOIA”.

Plaintiff BGV alleges, in line with federal fundamentals and state policy, that the general public are entitled to complete disclosure of information regarding government business and the official acts and policies of public officials.

All records related to decisions, procedures, rules, standards and other official aspects of governmental activity that affect conduct of Government and, by default, the public are open to production, inspection and copying. Restraints and exceptions on access to information are permitted by the FOIA but are strictly limited, due to the presumed need of full disclosure of information and importance of transparency in a functioning society.

Any public body that claims certain records are exempt from disclosure must prove their claim by carrying a burden of evidence. If a public body intentionally fails to comply with the FOIA or otherwise act in bad faith, courts may impose a civil penalty of between $2500 and $5000 for each instance.

The open and transparent language of Illinois statute states that “All records relating to the obligation, receipt and use of public funds of the State, units of local government and school districts are public records subject to inspection and copying by the public”. To unduly deny access to records that fall under this provision and are not subject to exceptions would, in fact, be a “wilful, intentional, bad faith violation of FOIA”.

The Plaintiff claims that the denial of access to records and redirection to website is not in line with state provisions on freedom of access to information, which they should easily be able to provide if utilizing the correct archiving methods, ensuring they are not held liable for not complying with state law. (EGV also failed to provide a recording of a village board meeting to BGA, directing them to an obviously edited version found on their website).

Subject to the FOIA, public bodies do not satisfy FOIA by directing requesters to information posted online.
EGV denied the request in full, in addition to claiming that BGA’s request was out of vendetta for an individual member of the authority – a claim  irrelevant to their initial request, and simply demonstrates to another degree that EGV’s refusal of compliance was wilful, intentional and in bad faith. FOIA provisions expressly state, and have been clarified in case law, that the purpose or use of the requested documents is irrelevant to whether they are exempt or not.

The cost, time and damage to the reputation of a public body that FOIA related issues and litigation bring are significant- and unnecessary. They are clearly stated by law, tantamount to the functioning of an open government and society – and easily avoided by utilizing the correct archiving methods and tools.

How can PageFreezer help?

Open Records request are becoming increasingly frequent and so governmental and public bodies should have a standardized and efficient method of retaining and producing accurate records in line with federal, state and local laws.

PageFreezer technology provides an automated, cost-effective way to collect, retain and replay an agency’s online content and records without any involvement from IT professionals. PageFreezer crawling technology captures and archives all files, including links, audio and video, enabling live-replay and and evidentiary-standard records. Our SaaS solution ensures easy production of and compliance with FOIA requests, and saves bodies time, costs and the threat of sanction for non-compliance.

Don’t jeopardise your records or agency in light of FOIA or Open Records Requests – as a duty to retain and manage information, ensure you have the correct tools in place, such as PageFreezer, to do so.