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REMEMBER THE GROUND RULES

Flere are some of the things that financial advisors need to keep uppermost in their mind if they want to avoid getting into trouble on social media:

Fiduciary Duty – Fiduciary standards still apply – including, of course, the duty of care. Advice must be prudent and suitable to the client. Hasty or flippant comments on social media are no more appropriate than they would be using any other form of communication.

Use of Third-Party Sites – Using or linking to third-party sites – including “liking” or sharing content on those sites – can cause problems since the sites themselves may not be compliant. For example, FINRA bars links to third-party sites that contain false or misleading content.

Third Parties Posting on Your Site – Similarly, there are risks associated with third parties posting information or testimonials (if you are an investment advisor) on your site. (A “like” of your site may be considered a prohibited testimonial by the SEC.) Disclaimers are a minimum remedy; many sites restrict or prohibit third-party posting altogether, others allow you to turn off the “like” or endorsement feature. On the other hand, the SEC has taken an open-minded view on third-party ratings and rankings, if handled correctly. Typically, most sites can be made to work with some advance planning.

Compliance with Advertising Standards – More generally, the rules from the Investment Advisers Act of 1940 are fairly specific about the content of advertisements. Advisors who are regulated under the SEC and are using social media might find it difficult to avoid posting something that could be construed as an advertisement. Brokers who are regulated under FINRA have more leeway in certain areas; for example, the agency has held that social media fits its definition of public appearances, a distinction that relieves registered principals at a firm from having to approve in advance extemporaneous comments by brokers at public events.

Paper Trails – The Advisers Act requires investment advisors to maintain certain books and records relating to their advisory business (required records) for a specified period of time. “Records” in this case cover most aspects of an advisor's interaction with clients, and are interpreted by regulators to include social media interactions.

 
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