[IMGCAP(1)]The financial services industry has always had pretty specific rules about testimonials, recommendations and advisory.
When social media came along, it created the potential for serious regulatory violations. FINRA then created the standard upon which Registered Investment Advisor firms have been basing their own policies, allowing them to cautiously create an online social presence. Well, now the SEC has put out its own set of policies.
The provision that seems to have the biggest impact covers prohibited client testimonials. Under the Advisers Act of 1940 Rule 206(4)-1, advisors may not advertise using client endorsements or testimonials of any sort.
The proliferation of Facebook “Like” buttons on third-party sites increases the potential to cross regulatory lines, since Liking a post can be viewed as an endorsement. In addition, positive comments and Liking posts on a Facebook wall can be viewed as testimonials. To prevent issues from occurring, some firms prohibit unregistered public users from commenting, or they have posted disclaimers stating they do not approve or endorse third-party postings.
With regard to the remaining compliance matters, they read more like suggested best practices for firms to help them adhere to formal regulations and create their own internal social media policies. The SEC found that firms tend to have overlapping policies and procedures that apply to advertisements, client communications, and electronic communications, which were confusing in that they don’t identify social media specifically.
They suggest reviewing internal compliance programs to determine if social media use is addressed and ensure that the rules are currently being followed. The factors they focus on include:
• Usage guidelines: Base restrictions upon the risk to the firm, which sites are approved, and which functionalities are approved.
• Content standards: Suggest clear guidelines for content or use of pre-approved content.
• Monitoring: Determine how to appropriately monitor use and the frequency of monitoring.
• Firm resources: Determine if there are available resources for compliance and monitoring.
• Participation: Determine the appropriateness of a site.
• Training: Get training on how to appropriately use social media, consider requirement of certification.
• Personal/professional sites: Determine if the use is through a firm-sponsored profile or through an individually created profile. Review the potential risks for profiles that are part of a corporate enterprise.
• Information security: Review and address potential information security risks with social media use.
• Recordkeeping and document retention: Determine whether or not recordkeeping is being adhered to based on the Advisers Act if it applies to the content and that documentation is accessible as determined by federal securities laws.
To some, the SEC’s new social media guidelines may seem a bit vague. For these individuals, there’s security in knowing they are keeping to clear-cut rules, allowing them to not have to think too much about it. For others, the ability to have some flexibility in their firms’ social media use, within the rules, makes the online experience more enjoyable and more engaging.
What do you think? Are the SEC guidelines too vague or just right? We’d love to hear your opinion!
Kelly Googe Lucas is the marketing and social media manager for bbr marketing, a firm that provides marketing and social media strategy, training and tactical implementation for professional services firms. You can learn more by visiting their Web site at www.bbrmarketing.com.
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