More On Legal & Compliancefrom The Advisor's Professional Library
- Where Are We Headed? The ultimate compliance goal is to help ensure that everyone associated with an advisory firm acts ethically at all times. Advisors and RIAs should do the right thing, even when regulators are not looking over their shoulders.
- 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.
Since the advent of social media, financial services professionals have feared violating compliance regulations. Out of an overabundance of caution, many have been unnecessarily filing materials with FINRA.
Recently, the SEC issued a new guidance update regarding the use of social media. This update offers detailed information on the types of social-media technologies and communications that must be reported. Here are the types of things FINRA doesn’t need to know about:
- An incidental mention of an investment company or fund family with no discussion of its investment qualifications does not need to be reported. For example, “Consumer Reports wrote an article that mentions our Brand X rewards card. Are you a member?” would not require reporting.
- Incidental use of the term “performance” in relation to a discussion of an investment company or fund without specific mention of a fund’s return. The word “performance” can be used as long as it’s not promoting a fund’s return. For example: “Click on this link to see full details of our yearly performance since inception.”
- A statement unrelated to the merits of a fund that includes a hyperlink to general financial and investment information. The SEC notes a company can tweet things such as “Here’s a Q&A with Portfolio Manager John Doe regarding his views on the economy for 2013” or “Gold and silver have provided a relatively low correlation to stocks and bonds over the last few years.”
- A response to a social-media inquiry that provides factual information without discussing the investment performance of a fund. If someone asks about the net asset value of a certain fund on a given day, for instance, a company may offer the figure.
- The SEC clearly states that financial service firms may talk about their products, provide links to information about their products and share general market commentary without needing to file this content with FINRA. Just be sure you don’t tweet returns and investment merits.
Former Forrester analyst Augie Ray argues that the financial services industry has been overly cautious in its approach to social media, missing opportunities to benefit customers as well as their own businesses. He urges companies to embrace social media more aggressively.
The guidance update indicates that companies may use social media for marketing, providing incentives, facilitating applications, inviting public feedback and engaging with current and potential customers.
If you’re interested in deploying a social-media strategy to boost your business, don’t hold back. By following SEC regulations regarding social media, you can leverage the force of social media without raising any red flags.
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