Massachusetts lays out social media do's, don'ts

Jan 22, 2012 @ 12:01 am

By Liz Skinner

Massachusetts securities regulators last week outlined social-media guidelines for its 576 registered investment advisers, stressing record keeping, monitoring and periodic review of how financial advisers are using sites such as Facebook, LinkedIn and Twitter.

“Much of what an investment adviser posts on a social-media site constitutes advertising and as such is basically subject to the same regulations, record keeping and restrictions as other forms of advertising,” said William Galvin, secretary of the commonwealth.

The guidance will allow advisers to use new media in their businesses while still meeting existing investor protection regulations, he said.

A survey last year found that half of financial advisers in Massachusetts used or planned to use social media. However, just 30% had record retention policies related to the content, according to the survey, which was conducted by the Massachusetts Securities Division.

The guidelines recognize that record retention of interactive pages can be complicated but suggest that technology is available to help.

The oversight of social media has been difficult for firms and regulators, which have struggled to supervise the communications without impeding spontaneous conversations.

SEC ADVICE

The state guidelines follow advice that the Securities and Exchange Commission issued this month recommending that advisory firms periodically evaluate their social-media compliance programs for usage guidelines, content standards, content approval, training and sufficiency of monitoring. The SEC urged firms to pay particular attention to record-keeping requirements and suggested that advisers retain all records related to social-media communications and have them available for inspection.

That federal guidance was based on findings from SEC adviser examinations and followed a Jan. 4 order in which the commission alleged that an Illinois man was using social media to offer fictitious securities.

In one of the more specific guidelines, the Massachusetts advice stipulates that a client's “like” of an adviser's Facebook page — “without more” — doesn't constitute a testimonial. The state, however, concurs with the SEC guidance that a client's “liking” an adviser's web page in certain circumstances could be considered a forbidden testimonial.

Late last year, the Financial Industry Regulatory Authority Inc. backed away from a proposal that would have required broker-dealers to file social-media postings with the regulator. Finra said that it would exclude messages on online interactive forums from a post-use filing requirement.

The self-regulator proposes to treat online posts as correspondence.

Craig DuVarney, an adviser in Concord, Mass., agrees with the state's conclusion that use of social media is advertising and that it is important to use a third-party vendor to archive the information.

He said that he uses LinkedIn, but not Facebook or Twitter.

“LinkedIn is less of an advertising compliance problem because you can block people recommending you,” Mr. DuVarney said.

lskinner@investmentnews.com

0
Comments

What do you think?

View comments

Recommended for you

Sponsored financial news

RIA Data Center

Use InvestmentNews' RIA Data Center to filter and find key information on over 1,400 fee-only registered investment advisory firms.

Rank RIAs by

Featured video

INTV

Why broker-dealers are on a roll

Deputy editor Bob Hordt and senior columnist Bruce Kelly discuss last year's bounce-back for IBDs.

Latest news & opinion

Top 10 IBDs ranked by revenue

These independent broker dealers generated the most revenues in 2017.

8 podcasts advisers listen to when they aren't working

Listening to podcasts for the fun of it.

UBS continues to cut loans to recruits, while increasing compensation to brokers

The wirehouse reduced recruitment loans 20% and increased bonus loans 68% in the first quarter.

Things are looking up: IBDs soared in 2017

With revenue up, interest rates rising and regulation easing, IBDs are soaring.

SEC advice rule may give RIAs leg up over broker-dealers

Experts say advisers will be able to point to their role as fiduciaries as a differentiator in the advice market.

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print