Compliance

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Melanie Rodier
Melanie Rodier
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Social Media Is Wall Street's Number One Enemy

For the world-at-large, the whole point of Twitter is spontaneity. Not for Wall Street.

By the time Wall Street gets the hang of social media, the world may already have moved on to the next big thing.

The whole point of twitter is spontaneity, right? You suddenly think of something, type away, and off it goes into the twittersphere. Well, this couldn’t be further from the truth for Wall Street firms, who despite their heavy investment in social media, are light years away from using it in an enlightening way.

[For more on how Twitter can be used by financial analysts read Using Twitter To Predict Financial Markets.]

And yes, it’s once again the burden of compliance that is keeping employees away from the social media phenomenon that everyone’s grandmother even has finally embraced.

“Next stop Dow 57,757? Don’t count on it but Tuesday’s bullish session is in the books,” read one recent tweet from Morgan Stanley. But as an article in the New York Times points out, this was a far cry from an impromptu thought from an investor. Instead, it was “a pre-written post, taken from a library of 140-character messages that had been approved by the compliance department of Morgan Stanley and sent out by financial advisers at Morgan Stanley Smith Barney.”

Deutsche Bank, Wells Fargo and other banks likewise allow a select few of their employees to tweet from a pre-approved library of tweets, or after several internal checks have taken place – which can take hours – thus obviously removing any semblance of the spontaneity that is the backbone of social media.

Still, Wall Street and banks at large do recognize that social media is a largely untapped marketing opportunity. A number of banks read all their customers’ tweets about them and are fast to react to any criticism, knowing that negative word-of-mouth can catch on like a wild fire.

[For more on capital markets IT hiring trends, read On Wall Street, Social Media Needs To Be A Leap of Faith.

To try to bridge the gap between opportunity and regulation, several start-ups are now helping to steer Wall Street firms towards social media by helping them comply with securities rules while tweeting or facebooking.

These, the New York Times reports, include a firm called Socialware, which provides software that can archive messages, host a library of prewritten content and enable compliance officers to oversee postings. Clients include asset manager AllianceBernstein and Morgan Stanley Smith Barney, which reportedly gave about 600 of its 17,800 financial advisers access to Twitter and LinkedIn last summer. From the Times:

For Morgan Stanley Smith Barney, networking on social media hasn’t yet turned into a measurable stream of dollars. In the latest phase of the firm’s experiment, a group of 20 financial advisers can write their own Twitter messages. Of course, the postings must be approved by the compliance department before going online. The process can take several hours.

She didn’t write it, but Fay DeBellis, a Minneapolis-based adviser for Morgan Stanley Smith Barney, had posted “Next stop Dow 57,757?” Her version happened to be the 2,000th Twitter message by a Morgan Stanley adviser, a fact noted in a congratulatory article on the firm’s internal Web site.

Still, Ms. DeBellis, 47, says she has not won any business from Twitter. She has had more success on LinkedIn, which she said brought her about $10 million worth of business over 18 months.”

It’s a tough call. Banks’ heavy regulation of social media is there of course to protect investors. But firms also need to figure out a way of perhaps streamlining their approval process or find other ways of enabling their most ‘trusted’ employees to communicate more freely – and therefore broaden their network and business – on social media.

At a Dell press event on the evolving work force which I attended yesterday (more on this later), executives pointed out that emerging markets are often ahead of established markets in how they hire and manage their employees.

Emerging markets are also forging ahead in technology. One executive at a New York-based fund, who moved to the U.S from Russia several years ago, pointed out that in Russia, IT infrastructure is built a lot faster than in the U.S since often the country is starting from scratch. In the U.S, he pointed out, where companies are often dealing with legacy systems, if you want to increase bandwidth or make other improvements to your infrastructure, you need to get approval and it becomes a drawn-out process.

Wall Street firms must forge ahead and try and find a more efficient and sincere way of using social media or someone else might just get there first.

Melanie Rodier has worked as a print and broadcast journalist for over 10 years, covering business and finance, general news, and film trade news. Prior to joining Wall Street & Technology in April 2007, Melanie lived in Paris, where she worked for the International Herald ... View Full Bio
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