How to Create Corporate and Regulatory Compliance Policies

    As it relates to governance and compliance, every policy and procedure sharpens brands and shapes trust; neglecting the opportunity represents a silent gamble with credibility. How to Create Corporate and Regulatory Compliance Policies

    Corporate Governance & Regulatory Compliance Policies.

    FINRA and SEC regulations cover multiple aspects of social media interactions, including advertising, marketing, and client communications. For instance, FINRA’s Regulatory Notice 10-06 and 11-39 provide guidelines on applying rules to new forms of communication, such as social media. Similarly, the SEC’s Investment Advisers Act of 1940 emphasizes the importance of truthful and non-misleading communications, especially in the context of investment advice and testimonials. Firms need to ensure accuracy in posts, transparent disclosure of affiliations, and the legitimacy of claims made in marketing materials. Adherence to these regulations helps maintain integrity while avoiding the risk of sanctions or reputational damage.

    Transparency and Fairness in Communications

    Firms are required to present a true and fair view of their services on social media. This includes clear disclosures about the risks of investments and avoiding any misleading statements that could be construed as guarantees of returns.

    Testimonials and Endorsements

    There are strict rules regarding the use of testimonials and
    endorsements. For example, the SEC’s Rule 206(4)-1 under the Investment Advisers Act prohibits misleading or incomplete testimonials, and any use of such endorsements must be balanced and fair.

    Suitability of Advice

    Any investment advice offered via social media
    must be appropriate for the intended audience.
    This aligns with the general regulatory principle
    that investment advice should be suitable based
    on the client’s financial situation and objectives.

    Record Keeping Requirements

    Both FINRA and the SEC require firms to keep
    records of communications related to their “business as such.” This includes social media posts, direct messages, and any other form of communication that could influence a client’s investment decisions.

    Social Media as Advertisement

    Certain uses of social media can be classified as
    advertising, subjecting them to additional
    regulatory scrutiny. This includes requirements for recordkeeping and prior approval of advertisements by a principal of the firm under
    FINRA rules.

    Creating Governance Policies and Procedures

    Incorporating social media into corporate governance frameworks goes beyond setting policies; it requires integrating these platforms into the firm’s overall ethical and compliance culture. Best practices include establishing clear social media policies that align with broader corporate values, ensuring regular audits of social media activities, and maintaining a responsive governance structure that can quickly adapt to new regulatory developments or social media features.

    Firms should treat online communications similarly to traditional communications, adhering to anti- manipulation rules for social media marketing, the prohibition of misleading or deceptive statements, and ensuring that any investment advice provided
    through these channels is suitable for the intended audience. The SEC has particularly emphasized the need for advisors to be vigilant in how they present themselves on platforms like LinkedIn, where the blending of personal and professional content can create compliance challenges.

    Firm Voice, Brand, and Style

    Firms should establish policy around the brand,
    voice, and style to ensure consistency across
    various platforms. Clear guidelines for social media profiles of both the firm and its employees should be adopted, ensuring all communications adhere to regulatory standards and reflect the firm’s values and professional standards.

    Social Media Interactions

    As it relates to social media interactions, firms
    need clear protocols for profile management, post approval, and engagement with both warm and cold prospects. It’s crucial to ensure that content, whether original or shared, adheres to the firm’s ethical and regulatory guidelines.

    Training and Monitoring for Team Compliance

    Compliance training is essential in a landscape
    where regulations are constantly evolving. Regular training sessions should cover current compliance challenges, emerging trends in digital communication, and best practices for maintaining ethical standards. Additionally, implementing monitoring systems to oversee team members’ social media activities helps detect and address potential compliance breaches promptly.

    Documentation and Reporting of Compliance Activities

    Maintaining documentation of all compliance related activities is a cornerstone of effective corporate governance. This includes documenting the processes for review and approval of social media content, records of employee training sessions, and reports of any compliance incidents or audits. Accurate and detailed reporting helps demonstrate the firm’s commitment to regulatory compliance and can be invaluable during regulatory reviews or investigations.

    In closing, a thoughtful oversight process will help firms remain compliant, while protecting and maintaining brand consistency. This process should include regular audits of social media activities, ensuring that communications align with the firm’s marketing and compliance requirements. Monitoring should be both proactive and reactive, identifying potential issues before they become compliance concerns and responding swiftly to any detected breaches. With increasing complexities, technology is playing a bigger role in compliance monitoring and archiving. Systems that can automatically track, store, and analyze social media communications are aiding in real-time monitoring and ensuring firms can retrieve historical data for regulatory inquiries or audits.


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