In Denver, national REIT wins over Fidelity ETF exec as new CMO

Citi, Deutsche Bank & UBS fined $425,000 by FINRA for failure to supervise communications (not knowing who communicated with) through 3rd party web site.

The following comments are in the order that they were posted, but have incorrect time-stamps as a result of me re-posting them manually after the loss of the original story to a database error.

The question I have after reading this column is how big a deal it is to get into trouble with regulators? Many people break the speed limit or make minor additions to their homes without a building permit. They do a quick cost-benefit analysis and decide they can amortize their losses and come out ahead in the long run. If I win 10 new accounts by making a few allusions to my good performance on Facebook, isn’t that worth the consequences?

Brooke

Brooke: It is not worth it to “speed” on compliance matters, especially violations of the advertising rules. My experience is that the typical fine is around $50,000, split between the advisor and his/her supervisor or firm. More importantly, licenses are personal responsibility, and “tickets” can show up on CRD and need to go on U-4s and U-5s. In egregious cases, loss of licenses, such as for false performance data, can occur. And it is not juts the rep or advisor who can lose their license; it is the Principal and the Compliance officer. That is a lot of penalties for a little “speeding.”

BTW, Les might now of specifics, but as Twitter and Linked-in use non-firm servers, as do AOL, hotmail and gmail, how are they archiving business-related communications to be reviewed by a compliance person?

Gents;

Great articles on the use of social media tools within the RIA community. Your first article prompted me to post a blog: “Social Media Nets NEW AUM for RIA”,accessible here: http://budurl.com/32zx.

As Erik Qualman states in his new book “Socialnomics”: “Socialnomics is a massive socioeconomic shift. Yet, some of the core marketing and business principals of the last few centuries will still apply; whilst other basic principals will become as extinct as the companies that continue to try to force them on the unwilling public”.

Keep up the great work and insights.

Bruce

Bob,

Thank you for giving me the answer that I suspected was forthcoming.

I chose to play devil’s advocate because I suspect that human nature may
lull some advisors into wishful thinking.

It would be easy to convince yourself that social media is harmless and and that its vituality extends to the law…especially since there has yet to be a well-publicized case of an RIA getting into regulatory trouble because of it.

RIAs are in such a good position in the marketplace and in life. No reason to hazard that advantageous position by careless use of social media.

Brooke

When it relates to an RIA’s fiduciary obligations to clients and prospective clients, and violations of the Investment Advisers Act, there are no minor infractions. In view of recent events, I expect the SEC to be less forgiving than it might have been in the past, especially if the RIA knew it was violating the rules. And once you are perceived to be a firm that pushes the envelope when it comes to compliance, you’re less likely to be forgiven when you make a truly innocent mistake.

I was at a conference on Monday that was attended by representatives from the SEC. One speaker mentioned that the SEC sometimes uses enforcement actions to send the message to the investment management community that the Commission won’t tolerate certain types of conduct. Why risk the possibility that the SEC will send a message to other RIAs by coming after you? The best approach for any RIA is to send the message to all of your IARs and associated persons that your firm has established a culture of compliance.

With regard to Bob’s comment, there are companies that offer social media archiving services. I met a gentleman from a company called Smarsh at the conference. According to their marketing materials, they have the ability to save tweets and other forms of social media for RIAs. Tweets and other messages can be indexed, searched, and produced on demand. Since my solution to every technology challenge is to reboot, RIAs will have to check out these companies for themselves.

Brooke—

A great read and I advocate my advisor clients to use social media as another way to market their business and any “news” they have created of late. If they can land one new client because of a compliance approved Facebook business page, then by all means it’s a success. Facebook is just a new channel to market your practice. One interesting point as well is that Facebook/Twitter have massive search engine optimization so a simple Google search on your firm would yield your Facebook or Twitter pages very prominently. Advisors should ask their custodian/BD on the rules at play, most BD’s now have specific steps to take regarding social media.

Kevin Dinino,
KCD Public Relations
www.kcdpr.com

Very enlightening. Thank you.

Our RIA business development firm, www.thedrachmangroup.com, recently proved how a thought leadership curriculum with some social media outreach can result in measurable new business. For those RIAs interested in a recent and real case history on how this works, simply “google social media nets new aum” and read about Chuck Steege’s success at SFG Advisors.

Like it or not, the trend is for more and more communications to go online, whether it be newspapers, TV or even face-to-face interactions. This isn’t because people are being forced to change, this is because of their individual preferences.

What does it all mean? Social media will become increasingly more important in the years to come.

With that said… A majority of advisors are not getting over the compliance hurdle and thus are at a competitive disadvantage.

Mike Byrnes, President, Byrnes Consulting, www.byrnesconsulting.com