The financial services industry is no longer ignoring social media. But in the highly regulated practice of financial advising, guidelines about social media regulations are cloudy. This leaves professionals in an awkward limbo between adoption and isolation. However, according to Reuter’s, in a recent regulator’s letter to an investment advisory firm, some of this uncertainty was cleared up. Like paying two quarters to use those metal binoculars at scenic overlooks, the glimpse into the social media regulations horizon was valuable, but short-lived. All too soon, the view went dark, leaving financial service professionals with unanswered questions. Nevertheless, the letter’s guidelines hint at successful social media policies for financial advisers.
Social media regulations hint at appropriate policies
This deficiency letter is especially unique because such letters are usually kept private. The release of this letter consequently provides important insights into the priorities of regulators. From the letter, five key strategies for complying with social media regulations were revealed:
1. Train your employees. Employees should be trained to use social media in a compliant manner. The evolving nature of social media also means that training may need to occur periodically.
2. Write an appropriate use policy. A firm-wide policy that addresses content standards, employee monitoring, and appropriate usage of social media should be drafted and enforced. Be wary of advertising investment performance through social media.
3. Pre-approve static content. Static content, namely a social media profile “About me” or a Twitter bio, should be pre-approved per the firm’s appropriate-use policy. Pre-approval of “dynamic” content is not required, however. Examples of dynamic content not requiring pre-approval include Facebook posts, comments, and tweets.
4. Stay current on your archiving program. Archiving social media data is crucial to any social media strategy. But, simply signing up for an archiving solution is not enough. Ensure that record managers can access the data, and that the contracted solution is truly compliant.
5. Do not solicit testimonials. A “like” of a adviser’s bio, or any “like” that could be viewed as an endorsement of the adviser’s success, is generally considered a testimonial, and should be avoided. An adviser should discourage clients from using likes in this manner, and should remain aware of what is receiving a “like” on their profile.
Some of these insights are entirely expected. Writing an appropriate use policy, training employees, and requiring static content approval are all standard practices even in less regulated industries. Nevertheless, their inclusion helps cement their importance. The final two themes, however, are unique. Archiving social media records is not revolutionary in the financial industry. But, the condition that a firm should interact with its archiving solution is new. Simply signing-up and forgetting about the archiving solution is not compliant. A firm must understand and demonstrate that archiving fits into its overall compliance program. The final theme addressing a “like” as a testimonial is also helpful. Previously, the SEC indicated that a “like” and a LinkedIn recommendation could be considered a testimonial. But this letter is even clearer in its views of the “like” tool for financial advisers. It recognizes that the “like” can be utilized without constituting a testimonial, but advisers must be able to provide reasons as to why that “like” is not considered a testimonial. Essentially, the adviser can use the “like” tool, but regulators will be watching to ensure that it is not a testimonial.
Of course, many questions remain about social media regulations for financial advisers. More releases from the SEC, from court precedents, and from deficiency letters like this one in the future is expected. Maybe then will those binoculars stay open long enough for all financial professionals to feel entirely confident in complying with social media regulations.
