The Socially Savvy Advisor + Website: Compliant Social Media for the Financial Industry

Chapter 9What Does the SEC Say about Social Media?

The Investment Advisers Act of 1940 obviously predates the arrival of the Internet and social media. The leading communication technology of the time was the postal service and telephones, and most of the law's rules were written to address them accordingly. (Perhaps anticipating further developments in communication, the government broadened the rules somewhat to include “any means or instrumentality of interstate commerce, directly or indirectly”—leaving the door open for fresh-in technology.)

Indeed, when the U.S. Securities and Exchange Commission rolled out new guidance in January 2012¹ concerning compliance and social media, it observed that the use of social media in the financial advisory industry was fundamentally altering the business, and at an accelerating pace.

“Social media is landscape-shifting,” the SEC said. “It converts the traditional two-party, adviser-to-client communication into an interactive, multi-party dialogue among advisers, clients, and prospects, within an open architecture accessible to third-party observers. It also converts a static medium, such as a website, where viewers passively receive content, into a medium where users actively create content.”

Seven New Guidelines That CCOs Should Know

Toward that end, the SEC provided advisors with a broad range of things to consider for compliance purposes ...