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How Can We Comply with Making Securities Recommendations Through Social Media?

Social media is often portrayed as a technological Wild West, where the conversation is no holds barred and everyone gives as good as they get. Indeed, the pervasive opinion hurling has some observers suggesting that social media may be contributing to a coarsening of the public dialogue – people are eager to share their opinions but not necessarily to help contribute to and structure a conversation on a given topic. There's an expression: “The biggest communication problem is we do not listen to understand. We listen to reply.”

As it happens, the financial industry doesn't have the luxury of letting it all hang out on social media. And when it comes to discussions about investment advice, an advisor's blog is not a free-fire zone.

Securities recommendations must be suitable for the client for whom they are intended. In the social media world, this creates major difficulties – your audience can be hundreds or thousands of people. There's no way you can ensure that a particular recommendation you are making is sensible for everyone who's receiving your message.

THE TROUBLE WITH RECOMMENDATIONS

With a few exceptions, advisors generally are steering clear of making recommendations on social media, in chats, tweets, or even in static postings.

Remember, not every good idea is a good idea for everyone. Looked at differently, recommendations have to be suitable to the specific person to whom the recommendation is made. By and large, social media is a medium in which the people involved in a conversation may not know one another.

There also are limitations in the media itself. Take Twitter and chat rooms, for example. The problem of tweets and chats is that they are so short. It would be impossible to make a recommendation and disclose risk, conflicts of interest, the advisor's compensation, and the myriad of other things required of an advisor in the context of a tweet or chat.

Tweets and chats are the realm of teasers to get the reader to link to something deeper. That something might be a recommendation, if the problem of suitability can be overcome.

 
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