More On Legal & Compliancefrom The Advisor's Professional Library
- The Few and the Proud: Chief Compliance Officers CCOs make significant contributions to success of an RIA, designing and implementing compliance programs that prevent, detect and correct securities law violations. When major compliance problems occur at firms, CCOs will likely receive regulatory consequences.
- 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.
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.
Check out these stories on AdvisorOne: