August 06, 2012
media offers an opportunity to build your brand. But send a seemingly
innocent tweet – or “like” the wrong Facebook page – and you could step into a
regulatory minefield. ---
This double-edged sword has made social media the “hottest”
compliance topic—ahead of insider trading, advertising/marketing and valuation,
according to an Investment Adviser Association (IAA) survey of compliance
professionals (see “Social
Media, Insider Trading Top Issues in Compliance Testing”).
As of this year, 80% of registered investment advisers
(RIAs) have adopted formal, written social media policies, up from 64% in 2011
and 43% in 2010. Fifty-four percent of firms are prohibiting the use of
personal social media sites for business purposes, and 52% are reporting that
their social media testing has increased since 2010.
These statistics raise the questions: What are some of the
compliance issues advisers might encounter when using social media, and what
should firms do to prevent regulatory infractions?
Should a LinkedIn page aggressively promote a firm or an adviser, it may be
considered an advertisement.
“Say you have a LinkedIn profile page and it just has your business card
information, that’s one thing,” said Joanna Belbey, a social media and
compliance specialist at Belmont, California-based Actiance Inc, a provider of
social media compliance software (see “The
Principal Selects Social Media Monitoring Platform”). “But if it goes on to
talk about the firm, why it’s a great firm, and why [the adviser is] so
terrific, then it does become an advertisement.”
If LinkedIn pages are considered advertisements, recommendations present a
problem. Chad Bockius, chief executive of Austin, Texas-based Socialware,
another provider of social media compliance software, told PLANADVISER,
“Recommendations are clearly testimonials, and the fact you have testimonials
living inside an advertisement is a violation of the Advisers Act of 1940.”
Messages between LinkedIn members – inMail – can also be problematic, which
is why some firms have their advisers use prewritten notes for prospecting and answering questions, Belbey said.