The compliance risks of social media

Social media’s ability to give companies direct and nearly immediate access to their audience makes it a useful tool for generating new business, attracting talent, offering incentives and staying connected with customers.

At the same time, such instant access combined with unmonitored social media use and the ever-present chance of errors exposes companies to significant risk. This makes training employees on responsible social media use a vital part of any company’s compliance policy.

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Social media a potential minefield of reputational risk

The unpredictable, spontaneous and potentially viral nature of social media can impart serious reputational damage on a company. Examples from this year alone include:

  • Viral videos of security forcibly dragging a passenger off a plane;
  • Hackers posting messages severely criticizing President Trump from a corporate Twitter account; and
  • A strong social media response to a marketing campaign gone wrong.

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Social media carries significant legal implications

In addition to the impact on customer perceptions, social media use can implicate a wide range of legal issues, including:

Minimizing risk in social media for business

Risk management with regards to the above mentioned implications requires incorporating social media use into internal policies and procedures. As with more traditional activities undertaken on behalf of the company, employers have a duty to supervise their employees handling of social media accounts.

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Social media policies must therefore make it clear what employees may and may not discuss on social media. Additionally, approval processes can help minimize inadvertent posts and other errors, while continuous, independent oversight can catch mistakes that slip through those processes and allow for prompt corrective action.

Employee training is critical for ensuring that anyone engaging in business communications on social media understands the policy, as well as the potential risks involved.

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Regulatory burdens in a viral world

Social media presents more onerous compliance challenges for highly regulated industries. For example, multiple federal regulations require that companies capture and retain every post, tweet, check-in, like and poke related to business, whether made during work hours, after hours, outside the office or from an employee’s personal device.

The burden of keeping track of all such communications may be a contributing factor to recent statistics highlighting the failure to maintain business-communications records as one of the most prevalent violations of Security and Exchange Commission (SEC) regulations.

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For some, such recordkeeping will soon become even more important when the SEC begins requiring that investment advisors report all social media accounts — both corporate social media accounts and individual business-related profiles — on Form ADV on October 1, 2017.

This new requirement opens firms up to even more scrutiny during a SEC audit or examination, making recordkeeping procedures even more vital for compliance.

Thomson Reuters has a variety of tools available to help employers proactively manage their employees’ social media use, including online courses on Responsible Social Media Use, Electronic Communications and Information Security Compliance.

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