More On Legal & Compliancefrom The Advisor's Professional Library
- Disaster Recovery Plans and Succession Planning RIAs owe a fiduciary duty to clients to prepare for disasters and other contingencies. If an RIA does not have a disaster recovery plan, clients financial well-being may be jeopardized. RIAs should also engage in succession planning, ensuring a smooth transaction if an owner or principal leaves.
- Client Commission Practices and Soft Dollars RIAs should always evaluate whether the products and services they receive from broker-dealers are appropriate. The SEC suggested that an RIAs failure to stay within the scope of the Section 28(e) safe harbor may violate the advisors fiduciary duty to clients, so RIAs must evaluate their soft dollar relationships on a regular basis to ensure they are disclosed properly and that they do not negatively impact the best execution of clients transactions.
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.