Social networking sites like Facebook and LinkedIn raise serious new challenges for financial regulators, the head of the largest U.S. independent securities regulator said on Tuesday.
Wall Street bankers and analysts increasingly want to use social networking to connect and interact with customers, Richard Ketchum, the chief executive of the Financial Industry Regulatory Authority (FINRA) said.
But as these sites are currently designed they may not allow firms to keep the kind of archives of their employees' business communications required by regulators, Ketchum told industry group Securities Industry and Financial Markets Assocation's (SIFMA) annual meeting.
We continue to witness the advent of technologies that will challenge your ability to ensure compliance with regulatory requirements, Ketchum told the bankers and dealers. Social networking is one such innovation.
Most firms prohibit their employees from using sites like Facebook for business, partly because of the difficulties they pose for firms' ability to meet supervision and record-keeping requirements, Ketchum said.
Nevertheless, interest in these sites is inevitable and will not go unabated, he said.
FINRA has set up a task force comprised of industry representatives to explore how regulation can embrace technology advancements in ways that can improve the flow of information between firms and their customers without compromising investor protection, he said.
(Reporting by Kristina Cooke, editing by Leslie Gevirtz)