More On Legal & Compliancefrom The Advisor's Professional Library
- Regulatory Oversight of Investment Advisors Although the regulatory environment is in a state of flux, it is imperative that RIAs adhere to their compliance obligations. To ensure compliance, RIAs and IARs must fully understand what those obligations are.
- Do’s and Don’ts of Advisory Contracts In preparation for a compliance exam, securities regulators typically will ask to see copies of an RIAs advisory agreements. An RIA must be able to produce requested contracts and the contracts must comply with applicable SEC or state rules.
As advisors navigate the tricky terrain of using social media to communicate with clients, a recent Financial Industry Regulatory Authority (FINRA) enforcement action taken against an overenthusiastic Twitter user spells out exactly what sort of messages advisors should avoid.
FINRA disciplinary action taken against Jenny Quyen Ta, the founder of California-based Titan Securities, includes a fine of $10,000 and suspension from association with any FINRA member for a full year, through Dec. 5, 2011. The action was originally filed in January and released Friday in FINRA’s quarterly disciplinary report.
Among a number of findings, FINRA said that Ta failed to inform a registered firm principal that she had a Twitter account that she used to tout a particular stock.
FINRA determined that Ta’s tweets “were unbalanced, overwhelmingly positive and frequently predicted an imminent price rise, and Ta did not disclose that she and her family members held a substantial position in the stock.”
From at least April 2009 through Dec. 31, 2009, Ta maintained a Twitter account with more than 1,400 followers, and she posted at least 372 tweets, 32 of which were related to Advanced Micro Devices (Ticker: AMD) stock.
For example, according to a FINRA letter of acceptance, waiver and consent signed by Ta on Sept. 29, 2010:
- On Sept. 9, 2009, Ta tweeted, "Keep an i on AMD ppl! Just bike abve $5 = margins & institutionals can now 'play ball!' Barclay upgraded to $7 ystrdy, but it should be $10+"
- On Nov. 18, 2009, Ta tweeted, "How accurate am I with AMD? Just check out my tweets! The future of AMD in 2010? Ummm..I would say $12 is conservative!"
- On Dec. 15, 2009, Ta tweeted, "Its going 2 b a good Xmas & 2010! Ck out AMD! Like I have said, it should b @ least a $10B co. which should b @ $ 15/shs. HappyTrading!"
In addition, FINRA found that Ta's tweets failed to disclose that she and her family members held more than 100,000 AMD shares. Also in 2009, Ta created two websites, jennyta.com and JCConcordeSecurities.com, “which included representations about her career accomplishments,” FINRA said, adding that Ta never obtained approval from a registered firm principal for these undisclosed websites.
Ta consented to FINRA’s findings without admitting or denying them. Her websites and Twitter feed are no longer available online, although Ta’s LinkedIn profile still states that she is founder and CEO at JC Concorde Securities in Orange County, Calif.