SEC Provides Social Media Guidelines for Investment Advisers

The SEC recently provided guidance regarding the use of social media by investment advisers after charging an Illinois investment adviser with fraud resulting from an offering of more than $500 billion in fictitious securities through various social media sites.  Pursuant to the Advisers Act Rule 206(4)-7, investment advisers are encouraged to adopt and occasionally review the effectiveness of their social media policies and procedures (see http://www.sec.gov/about/offices/ocie/riskalert-socialmedia.pdf for more information).

Since the use of social media by an investment adviser must comply with federal securities laws, including recordkeeping, compliance, and antifraud provisions, the SEC suggests that those utilizing social media adopt policies that address multiple factors, including, but not limited to: usage guidelines, criteria for participation, content standards, approval of content, and monitoring.   Special attention should be given to third-party content and recordkeeping.  Investment advisers must retain all social media communications containing information satisfying their recordkeeping obligations for at least five years.

Finally, it should be noted that the SEC predominantly regulates investment advisers with more than $25 million in client assets, leaving the regulation of other investment advisers to the states in which they reside.  Some states, including Massachusetts, have recently released similar guidelines regarding the use of social media by investment advisers, which state-registered investment advisers should be aware of.

© 2012 Parsonage Vandenack Williams LLC

For more information, contact info@pvwlaw.com

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