SEC Guidance Frees RIA Marketing on Social Media

The SEC’s latest communiqué lays down clear rules on how registered investment advisers can appropriate user testimonials from third-party sites.


Registered investment advisers (RIAs) feeling in the dark about what’s considered industry fair use of social media now have some more guidelines to follow. In its March 2014 memo, the Securities and Exchange Commission clarified rules on how RIAs can use consumer reviews on third-party sites, and it loosened restrictions on testimonials relating to noninvestment matters.

The new direction centered on how the long-standing rule barring registered investment advisers from using testimonials in their advertisements can be applied to social media. Essentially, regulators said advisers can link to consumer reviews and comments on third-party sites, as long as all of the comments appear. In other words, advisers can’t edit out negative reviews.

“If the adviser doesn’t have any control over whether a comment is being shown on a third-party site, it’s allowable,” says Amy McIlwain, president of Financial Social Media, a Denver–based digital marketing agency. In addition, comments can’t be ranked, so that, for example, only positive reviews appear at the top of the page.

The clarification frees advisers to include references on their own sites, such as “Read about us on Facebook,” along with links to the appropriate social media page. That is because Facebook, like other third-party sites such as Google Places and RIA directory BrightScope, does not allow users to edit, select, suppress or rank comments about themselves.

The SEC guidance effectively bars advisers from using social media sites that permit editing of comments. “On LinkedIn, for example, the adviser has the option to share those publicly or hide them, in which case they may choose to share only the favorable reviews, which doesn’t provide fair and balanced views,” McIlwain says. “Therefore, RIAs are not allowed to use the LinkedIn recommendations.”

In another clarification, the SEC okayed nonfinancial recommendations by advisers. The SEC guidance specifically listed religious affiliation and community service as examples of endorsements that would be permitted. McIlwain says such nonfinancial endorsements had created difficult situations for many brokers. “One of our advisers was upset because someone had endorsed him for waterskiing, and his broker-dealer made him take it down,” she says.


The release of the long-awaited guidance leaves brokers with a to-do list. For instance, McIlwain says, some third-party sites, such as BrightScope Advisor Pages, create listings of advisers using publicly available databases. These listings consist largely of basic profiles without input from the advisers being profiled but may also include comments from consumers.

Advisers should act now to complete their profiles on sites that have third-party objective reviews, McIlwain says. “You want to make sure if your name is coming up and people are leaving reviews, your profile is telling your story,” she says.

As investment advisers have increasingly engaged in marketing with social media, firms and regulators have been issuing guidelines. Last year a survey found that 83 percent of investment advisory firms had written policies governing social networking, twice as many as in 2010.

Before this latest memo, the SEC’s most significant guidance on social media for registered investment advisers came in 2012, when a risk alert from the agency said Facebook updates, tweets and other social communications should be treated like advertising. That required firms to track advisers’ social media activities to make sure they follow company policies.

The question of whether social media user comments and reviews of advisers should be considered prohibited testimonials was one of the important issues the SEC did not address in 2012. In that sense, the new SEC guidelines give advisers useful new direction.

Although the SEC’s communiqué provided needed clarification on some pressing testimonial issues, it did not address one that McIlwain has been seeing many advisers struggle with: whether it is permissible to refer to third-party content such as articles. For instance, an adviser may consider linking to an article discussing life insurance. “By sharing that article, are they endorsing life insurance or the companies mentioned in that article?” she asks. For now, the regulations on linking with regards to endorsement remain ambiguous.

Generally, however, the SEC’s direction is seen as clearing the way for advisers to become more active in social media and employing online references, and McIlwain expects adviser engagement in social media to increase. “It frees them up,” she says. “The guidance has actually been a good thing.”

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