InvestmentNews INsider

The INsiderblog

InvestmentNews reporters offer their take on intriguing or controversial articles from around the web.

What Elon Musk can teach advisers about social media

To avoid run-ins with regulators, advisers should run posts by a compliance team

Oct 15, 2018 @ 4:00 pm

By Ryan W. Neal

Social media is hard, and success requires patience, dedication and a lot of work.

There's no definite "right way" to use Facebook, Twitter, LinkedIn or any other platform. There's no handbook for advisers on how to attract a million followers on Twitter like Josh Brown, or grow a blog to the prominence of Michael Kitces' Nerd's Eye View.

But there sure is a way to do it wrong, as Tesla CEO Elon Musk recently found out.

After Mr. Musk tweeted in August that he had secured funding to take his electric car company private, Tesla's stock price soared. But the Securities and Exchange Commission filed suit Sept. 27, arguing that Mr. Musk's tweet was misleading.

Mr. Musk eventually agreed to pay a $20 million fine, step down as Tesla's chairman (and not run for re-election for three years) and have future tweets about the company approved by lawyers. That didn't stop him from getting in an insult, calling the regulator the Shortseller Enrichment Commission.

Tesla was ordered to pay an additional $20 million and appoint two new, independent members to the board.

Though Mr. Musk's candor and spontaneity have propelled his Twitter account to more than 22 million followers, the whole episode underscores how important it is for corporate executives to have their tweets reviewed for compliance. That's especially true for advisers, given the additional scrutiny they face from the SEC and the Financial Industry Regulatory Authority Inc.

Anthony Lendez, a partner at accounting firm BDO in New York, recommends RIAs and broker-dealers have social media policies and procedures for employees using LinkedIn, Twitter and even conference calls. You don't want every word to be a canned corporate message, but in order to avoid a Musk-style tango with regulators, advisers should check with their organization's general counsel to make sure content is permissible under the company's policy and conforms to all relevant regulations.

(More: Find success with an organized social media strategy)

"Elon Musk's brush with the SEC is a reminder to financial advisers that the regulatory body is keeping a close eye on social media," Mr. Lendez said. "It's important to think before you tweet because what's published on social media can carry consequences."

Part of what got Mr. Musk in trouble was that the funding to take Tesla private wasn't as cut-and-dried as his words "funding secured" seemed to indicate, said Keith Marks, executive director of Ascendant Compliance Management. When providing company information to the public, it has to be full, fair and not misleading, which can be a difficult task on social media.

"Not everyone will always interpret what you say with the perspective," Mr. Marks said. "Places where people tend to deliver a short message are subject to misinterpretation."

(More: Social media all-stars of the financial advice community)

The most common area where Mr. Marks sees advisers trip up is using hyperbole on social media. An RIA calling itself "one of a kind" on Twitter could be accused of false or misleading marketing by regulators.

Advisers also can get in trouble for talking about specific trades they've made or how they've profited from an investment. Regulators can interpret this as "cherry-picking" or "portfolio pumping."

"Most of the problems involve people trying to provide performance indicators without proper disclosure, or statements that exaggerate their qualifications," Mr. Marks said.

He and Mr. Lendez agree that advisers should think carefully before using an off-the-cuff, irreverent voice on Twitter, even if that has proven wildly successful for others. Those accounts are outliers, and it's extremely hard to replicate their success.

If you decide to go that route, at least study up on the rules — both the regulators' and those of whatever firm you're affiliated with. Training is key to knowing what's safe and what can land you in hot water.

Just don't be like Elon.

0
Comments

What do you think?

View comments

Recommended for you

Upcoming Event

Mar 14

Conference

WOMEN to WATCH

InvestmentNews is honoring female financial advisers and industry executives who are distinguished leaders at their firms. These women have advanced the business of providing advice through their passion, creativity, inclusive approach and... Learn more

Featured video

INTV

Where in the U.S. are RIAs growing the fastest?

InvestmentNews' deputy editor Robert Hordt talks to senior columnist Jeff Benjamin about his report on how registered investment advisers are faring in different regions of the country.

Latest news & opinion

Top 10 RIAs in the Northeast

These are the largest registered investment advice firms in the Northeastern U.S., in terms of assets under management.

10 predictions for financial advice in 2019

Deloitte expects these 10 changes will hit the financial advice business in 2019.

Midwestern magic? RIA assets soared nearly 30% there last year

Theories for what's driving the growth spurt abound, but it surpassed all other regions of the country.

8 apps advisers love for getting stuff done

We reached out to advisers to find out which apps they are using to run their business more efficiently.

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