Have you heard this one? “How do you make a compliance officer cringe? Two words: social media.” For most financial companies, it’s not a joke. With such a sensitive nature to their business, it’s obvious that finance firms like Morgan Stanley have to take a hard stance when it comes to social media and their compliance efforts. Just this week, what Morgan Stanley did – allowing its advisor’s to begin using Twitter and LinkedIn – may very well set a standard for financiers going forward.
Maybe it’s a compliance officer’s nightmare, but the company is going where others on Wall Street fear to tread- social media compliance integration. An executive at the company advising Morgan Stanley on social media put it this way: “For all of the criticism that Morgan Stanley has taken around this initiative, I would challenge anyone to show another firm of their size that is taking as aggressive an approach toward making social media a strategic part of their business.”
We’ve seen so many companies taking notice of the implications of social media, in terms of ethics and compliance. We’ve recently worked with companies to build their codes of conduct with implicit content devoted to this area. As for Morgan Stanley, they are taking due diligence into account as they move into the risky realm of social media, but they have proven that their compliance programs are worthy of the challenge.
Remember the story of the Chinese bribery charges against Morgan Stanley exec Garth Peterson? His sentencing is coming up in a couple of weeks. Morgan Stanley was exonerated and won’t face any penalties, because the company was able to show it had a pre-existing, effective and evolving compliance program, and persuaded the government that the executive acted on his own and against the company’s established policies.
Morgan Stanley’s solid anticorruption compliance program didn’t prevent the fraud from happening in the first place – there will always be bad actors, including some rogue advisor who might Tweet the unthinkable – but it did catch and stop the Peterson fraud from going further. Their compliance program went a long way to mitigate Morgan’s Stanley’s role in the fraud. Morgan Stanley is tiptoeing their way into social media – risk and compliance managers, you might want to get some rest – but they’re doing it with an eye on compliance.