More On Legal & Compliancefrom The Advisor's Professional Library
- 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.
- Conducting Due Diligence of Sub-Advisors and Third-Party Advisors Engaging in due-diligence of sub-advisors isnt just a recommended best practice it is part of the fiduciary obligation to a client. An RIA should be extremely reluctant to enter a relationship with a sub-advisor who claims the firms strategy is proprietary.
The Securities and Exchange Commission released Friday guidance clarifying which social media posts mutual funds and other investment companies must file with the Financial Industry Regulatory Authority.
Mutual funds and investment companies are required to file certain advertisements for review by the regulator. But out of an “abundance of caution, many mutual funds and other investment companies may file materials on their social media sites with FINRA unnecessarily,” the SEC investment management staff says.
The guidance states that “certain interactive content need not be filed” with FINRA.
Whether a post or set of posts should be filed, IM staff says, depends on its “content, context and presentation” and requires consideration of such factors as whether the post is “merely a response to a request or inquiry from the social media user or is forwarding previously filed content.”
Examples of when a communication doesn’t need to be filed include:
— An incidental mention of a specific investment company or family of funds not related to a discussion of the investment merits of the fund.
— The incidental use of the word “performance” in connection with a discussion of an investment company or family of funds, without specific mention of some or all of the elements of a fund’s return (e.g., 1-, 5- and 10-year performance).
The guidance provides examples of the kinds of communications that the staff believes would be subject to a requirement to file with FINRA and examples of communications that would not trigger a filing requirement.
The guidance was released by the SEC’s Division of Investment Management under the first in a series of IM guidance updates.
Read SEC’s Champ Outlines ‘IM Moving Ahead’ Initiative on AdvisorOne.