For advisors, sending that next tweet might be a little less stressful thanks to new guidelines from the Securities and Exchange Commission.
In the first clarification the regulator has officially offered on social media filing requirements, the SEC said that certain interactive posts do not qualify as promotional or marketing and do not need to be filed with regulators.
The staff believes that certain interactive content need not be filed, the SEC wrote in its guidance. Whether a communication need be filed depends on the content, context, and presentation of the particular communication or set of communications and requires an examination of the underlying substantive information transmitted to the social media user and consideration of any other facts and circumstances, such as whether the interactive communication is merely a response to a request or inquiry from the social media user or is forwarding previously-filed content.
According to Section 24(b) of the Investment Company Act of 1940, firms must file any advertisements, pamphlets, circular, form letters or other sales literature addressed to or intended for distribution to prospective investors prior to or within 10 days of their release. In 2010, FINRA clarified that the SEC could conclude that interactive content on social media sites qualified as advertising and fell under the jurisdiction of this and Rule 482, which requires registered investment company performance advertisements to be filed with the Commission.
That translated into a lot of paper work, according to Steve Marsh, the founder and CEO of Smarsh, a software company that helps around 20,000 clients in financial services and heavily regulated industries monitor and record their online presence. Because of the rules subjectivity, it fell to the firms to decide what merited filing, he said.
This is really just the SEC saying, Not every one of these tweets or Facebook posts should be considered an advertisement and therefore please dont send them to us. Were getting overwhelmed, Marsh added.
Now, some posts can go up without all the red tape. For example, filing is not mandated in cases where the discussions of a money manager or investment are not related to a discussion of the investment or merits of the fund, the SEC wrote. An example would be an incidental mention of the name of a fund when promoting a charity event that the fund was hosting.
Additional clarifications revolve around the same theme: The incidental use of the word performance in connection with a discussion of an investment company or family of funds, without specific mention of some or all of the elements of a funds return, would not have to be filed, the SEC wrote.
Overall, the SEC listed around half-a-dozen areas where filing or approval from the SEC was not necessary.
According to Marsh, the clarification will allow advisors to engage in more real-time conversations rather than waiting for approval before they post in some cases. They can use the technology closer to real time as its intended to be used so they get more of the business benefit out of it, he said.
Marsh was careful to note, however, that the guidelines do not lessen the burden on advisors and firms to record and monitor all the content being published, regardless of whether it is filed.
Even though you may not need to submit as many tweets or posts or social media items for approval, you still have to keep the business records; you still have to still have to archive and retain them; you still [have to] have a policy to supervise your employees, he explained. As an advisor, you still need to be thinking about what kinds of things are safe to post or what are not safe to post without prior approval.
Click here for the full report, which is available on the SEC website.
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