Recently, IIROC published updated guidelines dealing with the supervision of communications using social media web sites, such as Facebook, Twitter and blogs. The draft guidelines which were published February 7 are out for a 60-day comment period.
The guidelines aim to address “the unique compliance and supervisory issues” that may arise when advisors use social media tools as a means of communicating with their clients and the public for a business purpose says IIROC. The proposed guidelines are also intended to assist Dealer Members with designing firm policies and procedures to ensure they satisfy their compliance function.
Although IIROC in issuing the proposed guidelines has recognized that the nature of client communications has changed, the guidelines do little in the way of giving Dealer Members “meaty” guidance on how to supervise the activity, leaving Dealer Members to their own devices on how to satisfy their legal and regulatory obligations. The guidelines tend to blur the lines on the types of communications that have to be pre-approved and those that have to be supervised, the difficulty being determining what constitutes static versus interactive communications. It is no surprise then that many Dealer Members are hesitant to allow their advisors to use such tools.
The potential risks associated with using social media are significant, and there is no guarantee of any great returns. The added costs to Dealer Members in having to establish additional procedures and train staff on how to monitor twitter feeds or advisor blogs can become expensive and time consuming. There is no requirement for Dealer Members to permit their advisors to use such tools, however, the message is clear, if they are using social media to communicate with clients, the Dealer is required to either pre-approve or supervise the communication, and maintain copies of advertising material.
Despite the potential risks, Dealer Members and advisors will find it difficult to ignore the explosion of social media tools in everyday business. Clients have come to expect a different level of service with the social media tools available, and those firms not looking at ways to employ them, may fall behind the eight ball.
Nevertheless, the fact that IIROC has stepped out and tried to provide some guidance to the industry is better than keeping their head buried in the sand on the social media phenomenon that is taking the world by storm.
