The Compliance Considerations Of Social Media Participation

This morning, just as we were adding 50 more names to our Social Media directory of financial advisors using Twitter, we read a bylined article on (subscription required but a free trial is available) that concluded: “Unless investment advisors can figure out ways to present compelling yet balanced advertisements in 140 characters or fewer, the prospects for Twitter as a marketing tool appear dim at best.”

The article by Joshua Broaded, CFA, a principal consultant at ACA Compliance Group, points out significant compliance risks posed by Facebook and LinkedIn users who clearly have not been trained in the limits of what they can say. Having been responsible for marketing communications at a few asset management companies, I’ve also winced at quite a few out-of-bounds statements that I see being made online by advisors and asset management employees. These betray a lack of training and supervision. My suspicion is that the offenders are rookies.

This is another side of the transparency that comes with communicating today—if your systems and people aren’t current, the vulnerabilities may be inadvertently revealed by people using the newer communications channels. For example, I’ve seen tweets by job candidates heading toward or leaving job interviews. Vendors, too, are commenting on business strategies.

The social networking sites serve as a means of publishing some of what shouldn’t be said in the first place. Let’s not blame social media for training or policy inadequacies that need to be addressed within a company.

But, what are the guardrails governing asset manager and investment advisor use of social media? They are evolving. Some companies’ compliance counsel is clearly more comfortable with social media than others’, and some commenters are more optimistic than Joshua Broaded about the prospects of using Twitter while remaining in compliance. In fact, we've seen early adopter advisors adjust their online activity as more information is shared. Learning that LinkedIn recommendations could be considered endorsements, many advisors have turned off the capability, for example.

Listed below are links to several discussions that have taken place this year. We’ll do our best to keep this list current—and would welcome your submissions to

A LinkedIn discussion on social media guidelines for brokerage company employees
A discussion started on June 18, 2009, by a Davidson Companies PR staff person seeking examples

Additional Thoughts Re: Compliance Dangers for Investment Advisers Using Social Networking Web Sites
A June 16, 2009, update to Scott Gottlieb's May 26 guest blog on

Compliance Dangers for Investment Advisers Using Social Networking Web Sites
A May 26, 2009, guest blog on by Scott Gottlieb, president of U.S. Compliance Consultants, LLC, a full-service consulting firm that specializes in compliance and registration services for investment advisers and hedge funds.

More on RIA Regulation Changing
A May 21, 2009, post on Advisor Products' Andrew Gluck's blog.

Compliance Issues Posed by Blogging and Social Networking
Another one of Advisor Products’ excellent Webinars, this March 4, 2009, presentation features Brian Hamburger and Daniel Bernstein of MarketCounsel, one of the nation’s leading business and regulatory compliance consulting firms.

Web 2.0 Leveraging New Media in a Securities/Compliance Practice
A February 19, 2009, Webcast with Doug Cornelius, chief compliance officer of Beacon Capital Partners. Scroll down the list to find the February 19 Webcast, free registration is required.

Compliance Makes Social Networking Rougher for Registered Reps Than for RIAs
A December 31, 2008, guest blog post on Investment Writing by Bill Winterberg, CFP

The following presentation made by Doug Cornelius, Beacon Capital Partners, to the EthicsPoint Regional User Forum is not investment industry-specific but worthwhile.
Social Media and Compliance