Financial Regulator Calls for Crackdown on Facebook, Text Messaging
Recent problems with the financial system could be used as a reason for regulators to have authority policing social networking sites like Facebook and other types of electronic communication like text messaging. If Financial Industry Regulatory Authority (FINRA) CEO Richard Ketchum has his way, that's exactly what will happen.
Ketchum appeared on CNBC's Oct. 27 "Closing Bell" in an interview with the network's NYSE floor reporter Bob Pisani from the Securities Industry and Financial Markets Association (SIFMA) annual meeting in New York City. Ketchum explained how the Internet and text messaging are unconventional means of communication that pose problems for regulators.
"With all of our kids, they don't talk by phones or certainly directly to each other anymore," Ketchum said. "They talk through the Internet and they talk through text messaging and they talk through Facebook."
FINRA is the largest independent regulator for all securities firms in the United States and is over 4,800 brokerage firms that consist of 172,000 branch offices, according to CNBC. The National Association of Securities Dealers "merged in 2007 with the New York Stock Exchange's regulatory arm," according to USA Today to form FINRA.
As Ketchum explained, the problem social networking technologies cause for regulators like FINRA is they provide no audit trail.
"There are great problems from a regulatory standpoint now if that's being used as a sale's tool because there's not a good audit trail," Ketchum said. "We got to get there."
As Pisani explained, brokers are using Facebook to pitch financial products and therefore needed to be looked at that from a regulatory point of view.
"We got to have a good audit trail - that the firms have to have it for a compliance standpoint," Ketchum continued. "Many of them prohibit their reps from using it now, but you know the reality is that's how everybody communicates. What you've got to do is get the information, not prohibit it. It will never work."