SEC Releases Alert on Investment Adviser Use of Social Media

On January 4, 2012, the Securities and Exchange Commission released a 7-page alert called “Investment Adviser Use of Social Media.”  The document is the result of a review that the SEC conducted of “registered investment advisers of varying sizes and strategies that were using social media.”

The SEC observed that, while many firms they reviewed had “policies and procedures within their compliance programs that specifically apply to the use of social media,” there was significant “variation in the form and substance of the policies and procedures.”  Moreover, some provisions of these policies were confusing, vague, or off-point.

Based on these observations, the SEC offered a “non-exhaustive” list of 13 factors that investment advisers “may want to consider when evaluating the effectiveness of [their] compliance program with respect to … use of social media.”  Those factors include:

  • Usage Guidelines
  • Content Standards
  • Monitoring
  • Frequency of Monitoring
  • Approval of Content
  • Firm Resources
  • Criteria for Approving Participation
  • Training
  • Certification
  • Functionality
  • Personal/Professional Sites
  • Information Security
  • Enterprise-Wide Sites

The report also went on to discuss guidelines for sites that allow third-party content, such as testimonials, to be posted on their social media sites.

It concluded by reminding investment advisers they have a duty under the Advisers Act to preserve copies of all documents pertaining to the advice they give, regardless of what media it’s in.  Advisers “that communicate through social media must retain records of those communications if they contain information that satisfies an investment adviser’s recordkeeping obligations under the Advisers Act.”  That may be the most onerous requirement of all, and the report includes another list of factors to consider when evaluating whether a social media communication needs to be preserved.