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SEC Guidance on Investment Adviser Use of Social Media

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  • Baker, John
    The Securities and Exchange Commission s Office of Compliance Inspections and Examinations has issued a National Examination Risk Alert on Investment Adviser
    Message 1 of 1 , Jan 4, 2012
      The Securities and Exchange Commission's Office of Compliance Inspections and Examinations has issued a National Examination Risk Alert on Investment Adviser Use of Social Media (Jan. 4, 2012). "Social media," for this purpose, includes blogs, wikis, and podcasts, as well as social networking websites such as Facebook and Twitter. The guidance discusses a number of factors that an investment adviser should (or, in the SEC's words, "may want to") consider when evaluating its social media compliance program, although firms are cautioned that the list is not exhaustive. It notes disapprovingly that many firms have procedures that are unclear as to whether they address social media use, are not specific as to which types of social networking activity are permitted or prohibited, or do not address the use of social media by solicitors.

      A particular issue under the guidance is third-party content, for firms that allow the public to post messages or other content on their social media sites. Rule 206(4)-1 forbids registered investment advisers to publish or distribute advertisements that refer to testimonials. "Testimonial" is not defined, but the guidance interprets the term to include a statement of a client's experience with, or endorsement of, an investment adviser. This may include, for example, public use of a "like" button. The guidance states that some social media sites do not permit an investment adviser to disable the "like" or similar feature, which may require an investment adviser to develop a system to monitor and, if necessary, remove third-party postings.

      Some registered investment advisers are also broker-dealers and subject to existing FINRA guidance on social media. The guidance notes that such dual registrants are required to adhere to both the federal securities laws and FINRA applicable rules.

      The National Examination Risk Alert is available at


      FINRA guidance is available in Regulatory Notice 10-06, at


      and in Regulatory Notice 11-39, at


      John M. Baker <JMB@...>
      Stradley Ronon Stevens & Young, LLP http://www.stradley.com
      1250 Connecticut Avenue, NW, Suite 500
      Washington, DC 20036
      202.822.0140 fax
      FundLaw Listowner http://groups.yahoo.com/group/fundlaw
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