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April Rudin Headshot

I Have A Dream--Wall St And Social/Digital Media Become Facebook Friends

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Relationships are complicated and messy. It's a fact. That couple shuffling through the park holding hands after 50 years of marriage either are just having a good day or they've learned to push all the complicated stuff away and focus on what the true value of their relationship is.

It's no different on Wall Street. Stereotypically depicted as super-ego, predominantly type-A males and "hard-wired" species, it's tough to let go of all the complicated stuff that's in their DNA and just hold their hands - and to teach them to do the same.

This, to me, is the crux of the problem the U.S. Securities and Exchange Commission(SEC), FINRA and other regulatory agencies are grappling with. They're facing the daunting task of trying to regulate some of the finest minds in the world. They are still in that phase of the relationship where they think they can change the behavior and turn somebody into something they're not - make them compliant using outdated standards.

Compliance is among the most revered - and feared - words, missions and initiatives in the Wall Street community. It is one of the most respected, and sometimes disrespected, parts of the investing world. It is also one of the most influential communities of Wall Street, and as such it is a major stakeholder in the future in the current relationship spat over digital media versus compliance rules.
Can compliance become Facebook friends with marketing? Why can't we all get along?

I was in Toronto recently speaking at the CFA Institute's Toronto Wealth Management Conference. The CFA charterholder is widely considered the "gold standard" in the financial planning world. At this conference, I not only found the speakers excellent but also the level of engagement among attendees off the charts. There were probably 65 in attendance. It was during one of the sessions that I heard the sound bite that summed up the entire "relationship" problem.

Margaret Franklin, former chairman of the Board for the Global CFA Institute and co-coordinator of the event, made a statement that I immediately noted. Marg is a widely known and respected member of the global wealth management community, President of Toronto-based Marret Private Wealth. She summed it up by stating that we (meaning advisors and compliance folks) needed to return back to the elements over which we are united. Said Marg: "...we must not lose sight of the regulatory spirit which simply puts the client's interests clearly in the forefront."

And there's the problem. Financial services regulatory bodies continue to treat the investment and advisory world as if they're in the "change" part of the relationship. Maybe they've got them to put down the toilet seat and clear away the dishes, but they're still nagging about candle-lit dinners, walks in the park and shopping sprees at Saks.

Except it's not 1955 anymore, or 1933. It's 2013. The SEC and others keep tinkering and modify laws that are irrelevant and old. They keep trying to modify the relationship.
The modes and methods of communications have changed so dramatically that it's time for new laws to be re-imagined and re-written, focusing not on what needs to be changed but on what works - and how and why it works in the technology-driven world we live in today. It still means protecting the client's interests. But it also means waking up to the fact that maybe the other party needs to lift the toilet seat when they're done too.

As Marg so eloquently said, we cannot lose sight of the reason for compliance and the "spirit" in which it exists. But we need to recognize that we need a new way to maintain the regulatory spirit and discard those ideas that are no longer relevant in a world of Facebook, Twitter, LinkedIn, blogging, social media, posts, 'likes', endorsements, comments and opinions, all of which appear in real-time.
Here is the original law on which today's client communications is based. This includes social media platforms as well. It is the "truth in securities" law, i.e. the Securities Act of 1933. I copied from the SEC site, its two basic objectives:

...require that investors receive financial and other significant information concerning securities being offered for public sale; and prohibit deceit, misrepresentations, and other fraud in the sale of securities.

I don't think there is a dissenter among us who would or could take issue with these goals. On the other hand, in an effort to "protect" we have also drifted from the spirit on which this is based. One of the ways clients' interests can be well served is through the dissemination of good information and educational initiatives. Social communities seek to provide affinities and forums for collaboration and engagement. Financial services regulators have an opportunity to become Facebook friends by returning to the spirit of the law.

It doesn't have to be that social media and financial services regulators are "natural enemies." It just means accepting the relationship for what it is, doing away overthinking the complicated stuff and getting to that place where the long-married couple walking in the park are at: focused on the true value of the relationship.