Richard Ketchum of the Financial Industry Regulatory
Authority says certain electronic communication must be regulated
as means to sell financial products.
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.
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.”
