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."
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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.
