Some interesting new developments in how financial services firms are faring in the world of social media in todays New York Times article: “On Wall Street: Keeping a Tight Rein On Twitter.” The article describes how companies such as Morgan Stanley, Deutsche Bank, Guardian Life, and Wells Fargo are managing to operate within in the confines of internal compliance officers and government regulators.
Unfortunately, it seems to be a wholly “unsocial” procedure. The article describes how, at Morgan Stanley, for example, all Tweets are prescreened by internal compliance officers. This naturally means that all timeliness, one of the fundamental principals of sharing on any social media network is not possible.
The pre-screening of messages is likely an inavoidable step for regulated industries such as pharma or finance. Till now much of social media activity is focussed on financial relations reporting, and press releases. One approach that has some promise is individuals sharing under their own name, on accounts which identify them as working for a pharma of financial services company. As well, there are a host of pharma and financial services blogger/experts who are extremely present on social media. Very likely these consultants make their living advising actual companies, so their comments are only one step removed from an actual firm.
The point will always be the content. Noone argues that stock tips or drug recommendations can be released without regulation. And that regulation will always slow down the process. Still, individuals are also very interested in what is happening at a company. Goldman Sachs, for example, likely missed an opportunity to respond to the resignation letter story. Here was a PR nightmare, unfolding fast across social media and GS failed to put even a simply message out there to defend itself.
July 10, 2011
Highly regulated industries such as pharma or finance face enormous challenges to use social media effectively, without violating regulatory restrictions. Clear, these companies cannot afford to wait for easy solutions. For both pharma and finance, the issues are similar. Broadly speaking, companies cannot be seen as making unsolicited recommendations such as “buy this stock” or “use this drug”. International regulatory issues are particularly challenging. As Twitter, FaceBook, LinkedIn etc. are effectively borderless, companies must be extremely careful not to violate a regulation in some far-flung nation. Finally, most daunting of all, how to respond to the mass commentary taking place about their companies and business areas without their input. The blogging public has created a large share of search results for major brands, in fact, 25% of search results for major brands are user content. For all companies the need to respond to this public discussion is critical.
Morgan Stanley’s recent announcement that 600 of its most elite brokers will begin to use Twitter and LinkedIn (See Bloomberg) demonstrates one potential solution, and a small step forward. In 2010 the Financial Industry Regulatory Authority (FINRA) issued the first guidelines for social media use. Essentially, as all broker communication is already recorded and archived, so will the the social media activity. The same regulations regarding insider trading and recommendations apply to social media. Effectively all information has to be treated as sales literature for public distribution. On Twitter advisors will be limited to posting information which has been approved in advance by Morgan Stanley. On LinkedIn, brokers may not be allowed to randomly connect to people, they may not recommend themselves, or be recommended by others. And all activity will be archived on a custom Morgan Stanley system for three years. For more, see: Morgan Stanley Cautiously Wades Into the Social Media Waters – Will Others Follow.
For pharma, the regulatory issues are quite similar, in principal they may not promote their brands or products in an unregulated manner, and they must be wary of differences in international restrictions. Unfortunately, here to, the regulators are slow to respond. The first FDA hearings on social media were held in 2009, but formal guidelines are still, apparently, being developed. The FDA has managed to remind pharma companies that, as with finance, the standard communication guidelines apply. For example, any references to specific drugs must include the relevant risk information, and can only be advertised for it’s specific uses, etc. But after that it gets tricky, what happens when a FaceBook user makes a comment implying broader benefits for a drug, and then this comment gets shared within a branded context? Pharma regulations also require companies to notify the FDA in cases of “adverse events”, i.e. when a customer reports a negative effect from a drug. This implies that if a patient complains about a drug in a FaceBook post, the pharma companies are obligated to be aware of the comment and report it.
On the other side, are the massive opportunities social media presents for both pharma companies and patients actively seeking out as much information as possible about their illness. We are closely connected to the cause of Rare Diseases through our work with CheckOrphan and Swiss Rare Disease Day. Orphan diseases are diseases which affect less than 1 in 2,000 people, and therefore do not receive the research and funding they require to find a solution. For these people, finding as much information as possible is hugely important, as is connecting to a global community of people who have experiences or information to share. An additional challenge, since doctors so rarely encounter these sicknesses, they often do not recognize them, and fail to make proper diagnosis.
In this context, finding the right balance of utilizing the strengths of social media to share information and build communities, within the regulatory framework is a clear challenge. It seems likely, regulation will adapt to meet challenges of this new media over time.