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
