Advisor alert: sEC ups disclosure requirements for advisor social
ReD FLAG ReMINDeR
The use of social media as a financial-services
marketing strategy has come a long way. Less
than 10 years ago, only a minority of advisors
used platforms such as Facebook and LinkedIn
to help promote their businesses. even that
was an uphill battle, with compliance departments and
financial regulators placing roadblocks in their path.
Today, the majority of advisors use such technologies to
engage with the public, promote themselves as thought
leaders and identify experts and best practices that can
help them operate more effectively.
The maturation of the socia media regulatory framework has played a large role in fostering this growth. Unlike in the early days, financial advisors now have bright
lines to respect, as well as the technology tools to monitor,
store and assess their posts. This is a good thing, since the
Securities and exchange Commission has announced that,
starting october 1, 2017, it will once again raise the socia
media regulatory stakes for investment advisors.
The agency announced this move in August 2016 as
part of a broader effort to modernize Form ADV disclosure requirements. It will now require more information
on ADVs about separately managed accounts, clearer
guidelines for umbrella registrations (for multiple investment advisors on one ADV) and various additional data
points, including listing the social media platforms on
which advisors have a presence and for which they control the content.
Here’s what this means in practice: Starting in october,
investment advisors must disclose all of their corporate-owned social media accounts (example: a Facebook business page) as well as individual accounts on which they
publish business-related content. The goal of broadening
social media regulation: to give consumers more tools for
evaluating the risk of doing business with an advisor. A
laudable goal, for sure, but one that will force financial
advisors to up their game when it comes to responsible,
compliant use of social media.
What to do from now until october 2017? Mike
Pagani, senior director of product marketing and chief
evangelist at Smarsh shares a few pointers.
First, get ready for closer SeC attention to advisor
social media practices. Since they will now have more
access to this information, it’s fair to assume they will
make full use of it during their advisor audits.
Second, take another look at current systems used to
archive, manage and report on socia media use. Make
sure they can quickly produce the reports needed to
satisfy an SeC auditor.
Third, consider using technology that can aggregate
social media posts with other forms of client communications in order to provide a full picture of advisor/client
interactions across various forms of media and over time.
other expert tips to consider:
Make sure to have appropriate policies and procedures
in place that ensure all advisors on social media are
properly supervised and trained to use these platforms
without posing undue risks to the public.
Use appropriate disclosures when posting promotional content and follow all FINRA advertising compliance
Avoid making securities recommendations on social
media, especially if you are covered by the DoL’s Fiduciary Rule. Making specific recommendations might lead
consumers to think they apply to them. If they don’t
work out, they might file lawsuits claiming violation of
Most importantly, make sure to post only accurate,
supportable information on social media. The last thing
you want is someone charging you with misrepresentation and forcing you to use your e&o insurance policy.
With this and all compliance-related matters, it’s better
to be safe than sorry. If you’re uncertain about what’s
required, check with your compliance department or firm
attorney. For further information about e&o insurance,
visit the National ethics Association’s e&o affiliate’s