The regulation of Social Media by Tony Green

I read in the latest edition of Smart Money Magazine that the financial industry was making a move towards regulating Social Media.

This, of course, seems odd as the whole point of social media in many respects is to deregulate the communications between a company and its customers allow uninterrupted insights into their desires and wishes. One of these wishes is to receive response to questions in inquiries in a non intrusive manner and in real time.
The financial industry had been using Social Media applications, such Twitter and Facebook, to pass out investment advice. The type of advice includes a full range of services from the most promising stock sectors to pitching the latest benefits of annuities.

The problem is the hyping of stock and the advent of false marketing claims is forcing the Financial Industry Regulatory Authority (FINRA) to take action in the same fashion FINRA regulates print advertising and commercials. FINRA regulation apply to brokerages fund companies and their employees. Its function is to govern what information can and cannot say in its communications. If an employee breaks any of the established rules the firm may be subject to fines and bans. The regulations do not cover all of the industry, for instance if the broker works on his/her own and not with a firm the rules do not apply.

Many industries have been late to embrace social media as a legitimate means of communicating to its customer even to the effect is has to change its rules in response to its impact.

It is nice to note Social Media is finally being appreciated for being a part on the conversation spectrum, even if that means regulation.