Finance firms are failing to properly record and supervise their staff’s activity on websites like Twitter and LinkedIn despite new FCA guidelines, a study concluded.
Compliance failures not only risk regulatory fines but reputational damage, bosses have been warned.

The FCA published its final guidance on social media use earlier this year, with an emphasis on cracking down on misleading promotions. It requires firms to have a system in place to retain social media communications.

A new study from Smarsh UK firms concluded, however, that businesses in the sector have failed to come up with adequate archiving and supervision systems to manage their compliance obligations.

The 2015 UK Electronic Communications Compliance Report found this failure despite firms treating the use of social media and mobile messaging as essential for business communication.

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Half of the companies canvassed lacked an archiving system for mainstream social media channels such as LinkedIn (58%) and Twitter (56%), or for mobile/SMS text messaging (58%).

James Thompson, regional director of Smarsh UK, said: “Without adequate archiving and supervision strategies in place, firms expose themselves to tremendous risk. Our research shows an alarming disjoint between firms understanding their (electronic communication) compliance requirements and implementing the systems to enforce and support these.

“The reality is that the cost of non-compliance extends far beyond a regulatory fine. It is also associated with reputational damage, can impact new business, and erode customers’ and investors’ trust."

The FCA requires firms to efficiently produce requested data, including e-communications during any examination.

The Smarsh UK report found that businesses lacked confidence in their ability to produce requested information in a reasonable time frame.

Over three quarters (76%) stated it had become more complex than ever to supervise messages.

Mr Thompson said businesses cannot rely on social media platforms to meet the requirement to have a system in place for retaining social media communications.

He said: “This increased regulatory scrutiny, coupled with the proliferation of unsupervised content, puts firms at a crossroads. Whilst firms are starting to embrace the new regulations, they have a long way to go to mitigate risk and act compliantly across all their practices."