The finance sector is under increased scrutiny for its use of social media, with regulators expected to fine-tune Australian laws, matching trends that are already in place in the UK and US.
Research by KPMG shows a marked growth in the use of social media by banks, super-funds, accountants, and financial planners, according to James Griffin, the director of the professional services firm's digital consulting practice in Australia.
The financial sector is much more tightly regulated than other industries, Griffin said, and as a result, the use of social media is now being more closely monitored for compliance and disclosure of products.
As a marketing tool, social media has moved past experiments to a full-scale promotion of products and services. “This is still new territory for regulators,” Griffith said.
The UK is developing guidelines to regulate the market through to November 2014. The US already introduced checks last year. "Australian regulators are taking notice of local trends.”
During the Australian government’s May 2014 budget announcement, KPMG clocked 8000 related Tweets between 7pm and 10pm. High-volume traffic was also tracked to financial services providers. These included banks, super-funds, accountants and advocacy groups.
“These were not your average citizen feeds. Using analytics, we were able to track usage patterns. It became apparent that social media is integral to broader services and product offerings.”
Clarifying grey areas
Regulators are targeting social media with the intention of monitoring and clarifying grey areas. “Financial services are built around trust, more so than any other sectors,” Griffin said. Regulators want to differentiate between what may be paid ads and services that are governed by traditional disclosure obligations.
Financial promotions need to be developed around compliance, said Griffin. “There are guidelines that govern financial promotion rules, and the UK and US are taking a lead with regulation.”
In the US, since December 2013, regulators have introduced consumer protection and compliance laws. These are tailored for banks, savings associations, credit unions, and non-bank entities.
The aim is to help financial institutions understand consumer compliance and legal risks, as well as related risks. These include reputation and operational risks that are associated with the use of social media.
“The focus is on managing social media risk,” Griffin added. “Australian regulators are taking the same path.”
Last year, the Australian Securities and Investments Commission (ASIC) alerted the financial services sector to social media disclosure arrangements.
In an ASX roadshow presentation, the organisation acknowledged a growing demand for social media to promote financial services, but cautioned that companies needed to pay attention to the kinds of information being used by traders, or investors, or other financial service providers.