SEC Gives Further Guidance on Social Media Use by Advisers

January 17, 2012

On January 4, 2012, the U.S. Securities and Exchange Commission’s (“SEC”) Office of Compliance Inspections and Examinations released a regulatory alert discussing the use of social media by investment advisers.

In recent months, the SEC has been reviewing the existing social media policies and procedures of registered investment advisers.  In the regulatory alert, the SEC documented many of its observations from these reviews and included some best practices to “assist [registered investment advisers] in designing reasonable procedures designed to prevent violations of the Advisers Act and other federal securities laws.”

One of the “hot-button” issues discussed in the regulatory alert is the use of the “Like” feature on social media sites and whether it constitutes a testimonial, which is prohibited by the Investment Advisers Act of 1940 (“Advisers Act”).  According to the regulatory alert, a third-party’s use of the “Like” feature on a registered investment advisers social media web page “could be deemed to be a testimonial if it is an explicit or implicit statement of a client’s or clients’ experience with an investment adviser or [investment adviser representative].”

In the regulatory alert, the SEC also noted that most of the firms it reviewed had policies in place for advertising, client communications and electronic communications, but no policies specific to social media.  According to the SEC, this is not sufficient and these registered investment advisers also need procedures that are specific to social media.  If this describes your registered investment adviser, now is the time to implement policies and procedures specific to social media.

RIA Compliance Consultants can help your registered investment adviser update its written policies and procedures; click here to schedule a time to discuss with one of our consultants how RIA Compliance Consultants, Inc. is able to further assist your firm. RIA Compliance Consultants has drafted detailed policies and procedures that address the compliance concerns addressed in the SEC’s regulatory release, such as the use of the “Like” feature, the retention of online communication, supervision of representatives’ use of social media and how your firm will be represented online.

Additionally, if would like further guidance, RIA Compliance Consultants has recorded a webinar, “Compliance for Social Media Site,” which analyzes many of the issues discussed in the SEC’s regulatory alert.  You can purchase a recording of this webinar by clicking here.

Posted by Bryan Hill
Labels: Advertising, SEC, Social Media