IOSCO published a report on the results of four surveys of market intermediary and regulatory practices regarding their use of (a) social media and (b) automated advice tools, and how regulators oversee the use of each of those tools.
According to IOSCO, the surveys aimed to understand how market intermediaries are using social media and automated advice tools, their plans for future use, and how regulators are dealing with such usage. Additionally, the surveys explored the unique challenges the tools present to regulators, and whether it is appropriate to devise recommendations or principles that regulators should consider in overseeing market intermediaries that use these mediums.
The results of the survey revealed:
- the most commonly used sites are Facebook, Twitter and LinkedIn;
- regulators have neither defined social media, nor prohibited its use by intermediary firms;
- regulators are increasingly using social media sites in the supervision of firms to identify personal relationships between parties and as a source of general information;
- intermediaries are using automated advice tools more frequently to assist with their suitability and Know Your Customer obligations;
- when making recommendations, most firms do so with respect to asset classes; and
- very few of the regulators who responded prohibit the use of automated advice tools, and very few have specific rules or guidance related to their use.
IOSCO stated that it cannot draw definitive conclusions from the report about the unique challenges of these tools, and will revisit the issues in the next year to determine whether further work is necessary.
Lofchie Comment: The surveys, which included a fairly significant level of response from U.S. firms, are interesting (more as to automated advice than social media) and provide some useful compliance guidelines as to the use of both types of tools.