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One of the things that gets financial pros into trouble with social media is the same thing that has gotten some of them in trouble for years; failing to convey the element of risk in investing and being overly enthusiastic about investment prospects, says Stuart Fross, partner at Foley & Lardner LLC.

For example, if you post a Tweet that says, “Learn about our favorite fund returning 96%! ” you have created a series of violations just from being excessively enthusiastic – even if it's true. Whenever you quote performance information, you must follow rules aimed at helping investors evaluate the claims; these include showing performance over relevant time periods and noting any special circumstances that gave rise to the particularly good performance environment.

Fross says the difference with social media is that the securities laws penalize misstatements and omissions of material fact. Material omissions (or even the risk of material omissions) “are what bury people with social media,” he says.

So how can you convey the potential for risk in social media? Fross suggests including footnotes in static content online; blog postings can include disclaimers that say, “Remember that all investing brings with it risks.” Platforms with limited space for such techniques, such as Twitter, require different approaches. Authors must take care that tweets aren't promissory; you can't link from a tweet to a disclaimer, he says, because a warning requires equal prominence with an investment idea. You can, however, link to a piece that tells more, and have the tweet be an invitation to learn more about the subject of the tweet, so long as the tweet is not promissory. You may also include a link to a disclosure in your profile as seen in Figure 10.1 by BlackRock.

Disclosure link on BlackRock's Twitter Profile

FIGURE 10.1 Disclosure link on BlackRock's Twitter Profile

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