SEC publishes risk alert on investment adviser use of social media

Abstract

Purpose

The purpose of this paper is to discuss the implications of an SEC Risk Alert and two FINRA regulatory notices concerning the use of social media by registered investment advisers.

Design/methodology/approach

The paper analyzes the SEC Office of Compliance and Inspections National Examination Risk Alert dated January 4, 2012, including general observations and factors for investment advisors to consider such as usage guidelines, content standards, policies for representatives and solicitors, monitoring procedures and third‐party content and testimonials. It discusses FINRA's detailed, bright‐line guidance in Regulatory Notice 11‐39 (August 2011) and Regulatory Notice 10‐06 (January 2010).

Findings

The paper recommends ways for investment advisers to address the use of social media.

Practical implications

Until more concrete guidance and market practice has emerged, firms may benefit from taking a conservative approach by limiting the use of social media and the ability of non‐firm personnel to “like” or post content to the firm's social media website, and by retaining all records of social media interactions in case of examinations.

Originality/value

The paper presents analysis and practical guidance from experienced financial services lawyers.

Citation

Robinson, K.T., Kelly, J.P. and Baron, A.E. (2012), "SEC publishes risk alert on investment adviser use of social media", Journal of Investment Compliance, Vol. 13 No. 2, pp. 44-47. https://doi.org/10.1108/15285811211238147