The nature of how firms communicate with their customers has changed phenomenally over the past decade and there is almost no sector unaffected by the advent of digital marketing and social media. For the Financial Services industry in particular, changes to the way entities communicate with customers have not come without regulatory implications, which naturally presents firms with new and complex challenges. Against this backdrop, Financial IT sat down with David Clee, Founder and CEO of RegTech and digital archiving firm, MirrorWeb to discuss these regulatory changes, assess the challenges and explore the role of technology in helping financial institutions best grapple with digital and social media compliance.
Financial IT: How have regulators responded to the growth in digital communications and social media for financial firms?
David Clee: To protect consumers and investors, financial institutions must be able to prove that any financial promotion they have made is “clear, fair and not misleading”, according to FCA CONC 3.3.1. However, with the widespread adoption of digital marketing and social media strategies by financial firms, the classification of what constitutes a financial promotion has been significantly expanded.
FCA guidance states that a financial promotion is regarded as “any form of communication (including through social media) capable of being a financial promotion, depending on whether it includes an invitation or inducement to engage in financial activity”. This definition now extends to all website communications, blogs, microblogs, social and professional networks, such as Facebook, LinkedIn, forums, image and video-sharing platforms like YouTube, Instagram, Vine and Pinterest.
Against this backdrop, the regulator states (per FCA COBS 4.11.1) that “a firm must make an adequate record of any financial promotion it communicates or approves”, with many regulatory bodies, including the FCA, ESMA, FINRA and SEC, requiring firms to adhere to strict record-keeping and financial promotion rules.
Being able to store, collate and retrieve these records across all digital platforms is therefore essential for firms to be compliant with the regulator. Financial companies must be able to establish what was published across any of their communication channels on any specific date, to allow them to prove a financial promotion was clear, fair and not misleading.
Financial IT: What challenges does this present for financial firms?
David Clee: Keeping up with these extensive digital record-keeping requirements presents a new and unique challenge to marketing and compliance teams.
The sheer extent of the requirements is the first main hurdle, as compliance officers need to be able to search and retrieve all details of any financial promotion, across any platform and communication channel. This is a significant task to be undertaken manually. For example, a global asset manager may own and administer hundreds of websites (not including their third-party brokers and intermediaries) and being able to capture and record all of the financial promotions across these sites is a clear resource and technical challenge.
Adding to this burden, social media platforms are constantly evolving, often with very little notice, making it near impossible to manually keep up with new systems and systematically archive content.
Finally, social media is prone to URL issues, with some 30% of social media messages containing links to website content on other pages, which are susceptible to being deleted or changed. Ensuring a valid record is kept at all times is therefore challenging, in particular, when capturing social media pages, teams would have to individually expand all comments, video descriptions and likes, consequently meaning meticulous and labor-intensive tasks like these can therefore make or break a firm’s ability to meet compliance requirements.
It’s unsurprising then that the enormous task of record keeping can be overwhelming for all firms, especially those who regularly publish online content. At a minimum, records should be kept for three years, however for cases relating to a life policy, occupational pension scheme, SSAS, personal pension scheme or stakeholder pension scheme, it can be up to six years. Indeed, some records must be kept indefinitely, in the cases of pension transfers, pension conversions, pension opt-outs.
Financial IT: What role does tech have?
David Clee: The process of collecting all these records doesn’t have to be so complex, thanks to advances in technology. This has been significantly enhanced by the rise of regulatory technology ‘regtech’ firms, which can efficiently meet website and social media compliance requirements with ease, mitigating many of the issues and resource burden new regulations pose.
Such technologies, including our own platform at MirrorWeb allow for end-to-end website and social media archiving. This task requires technology that can initiate a web crawl - the process in which all digital assets are collected to display a website exactly as it appeared on a specific date and time, ensuring web records are always available and can be evidenced at any moment in time.
Once a crawl is complete, this immutable record is held within a web archive, providing a replayable instance of the website/webpage that you can visit at any time. A web archiving platform automates this entire process by crawling and archiving websites on a set frequency. The archives are also indexed and fully searchable, allowing firms to find specific content they need to evidence or refer back to in the event of a customer complaint or regulatory investigation.
Against a backdrop of increasing regulatory scrutiny around financial promotions and communications, financial institutions are increasingly having to adapt the way their communications are archived. With more cases of problematic financial promotions, including the London Capital minibonds scandal and the FCA’s crackdown on the promotion and marketing of Peer 2 Peer platforms and online investment apps, there has never been a more important time for firms to wake up to the importance of these regulatory changes, as well as the opportunity that technology provides to address them.