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

Chapter 37How Does the JOBS Act Impact Social Media and Hedge Funds?

When the federal Jumpstart Our Business Startups (JOBS) Act went into effect in 2013, supporters hailed it as a milestone for the financial industry and investors alike.

One of the things the law did was loosen longstanding rules that restricted the ability of hedge funds and other investment companies to promote their private placements to the public. Advertising such investments to the general public had been barred before JOBS.

Now hedgies can market these securities across a broad range of advertising channels, including social media. The rules restricting participation in such placements to qualified investors still stand, with the funds required to take reasonable steps to verify the investors' qualifications. The criteria are defined as follows:

• An individual net worth or joint net worth with a spouse that exceeds $1 million at the time of the purchase, excluding the value (and any related indebtedness) of a primary residence.
• An individual annual income that exceeded $200,000 in each of the two most recent years or a joint annual income with a spouse exceeding $300,000 for those years, and a reasonable expectation of the same income level in the current year.

Who Wants to Buy a Placement?

What, you say? You haven't seen pro football players on television commercials lately plugging placements as they would SUVs or fast food? And you haven't gotten pitches for the same investments via social media? ...