Print Tech Insights 14: 1/9/12 – Social Media Surveillance, Part 1

How Technology Can Help with Social Media Surveillance
- by Larry Goldfarb

On Wednesday, the SEC issued a risk alert on the Advisor community’s insufficient response to the social media phenomenon.  In a recent article, Suzanne Barlyn of Reuters noted,

“Agency staff suggested that investment advisers may need to develop policies and procedures that are more tailored to social networking. Applying a patchwork of existing procedures to social media use may not be enough to keep employees in line.

The alert accompanied an SEC announcement on Wednesday that the agency charged an Illinois-based investment adviser with using LinkedIn and other social media networking websites to lure investors by offering more than $500 billion in fake securities.”

In essence, the use of social media will typically not cause an adviser or a broker to go bad, but it appears that it can magnify the implications of bad actors to perform dreadfully illegal actions.  As a result, policy and procedures while an important step, do not solve the problem.  Firms need to take up arms much the way they did following the Zubulake vs. UBS Warburg case that thrust email into a whole new light.  Now, the SEC requires financial firms to monitor and archive email.

Social networking poses a whole new set of problems.  For one, most social networking occurs beyond the companies four walls.  In other words, it occurs on home computers, tablets, even smart phones.  Second, it’s not practical to have a work account and one for home.  The whole reason to use social networking for business is to attract and market to friends and others.  Thus firms that attempt to archive and review those communications emanating from a business computer or from behind a firewall are providing an insufficient level of monitoring.   Hence the reason for the SEC’s recent alert.

Firms have developed a number of different policies and procedures to deal with social networking.  One forbids their employees from accessing these sites at work and makes it an offense punishable by dismissal to use theses sites for a business purposes.  Another has their employees complete an acknowledgement every quarter attesting that they did not use the site for business purposes.  Both firms review the web on a regular basis looking for mentions of their firm on among others, social networking sites.

Another alternative, not necessarily mutual exclusive,  is to acquire software to review and archive social media .  The best firms offer two solutions.  One is a traditional approach whereby the software archives and performs “key word / phrase” review of social media content emanating from behind the firm’s proxy.  The second is utilizing a “robot” maintained at the social networking sites themselves which can intercept posts from wherever they are originated.  An employee simply fills out a form that is linked to their social media account.  Most of these services then capture the social media posts and place them in firm’s email archive which provides a consolidated view of your firm’s employees messaging.  The concept is similar to the way vendors review Bloomberg messaging.

Next week, I will provide a list of vendors that perform these services.

And, as always, let me know what you’re looking for in the area of Compliance Technology.


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