Although the use of social media has been embraced by many industries, it is of particular concern for investment advisors and broker-dealers.
In many situations, the use of these outlets touch upon several areas. For investment advisors and broker-dealers, the advertising requirements under the Investment Advisors Act of 1940 and certain Securities Exchange Act of 1934 provisions may be implicated when one uses social media, including various features on Linked In or Facebook. Additionally, recordkeeping is a critical function required by both acts since this information must be maintained. Further, it is likely that those who work for either and use social media sites, may require supervision. Additionally, when one uses these types of communications, there are various regulations that require the firms to monitor these third party communications to ensure that, among other things, non-public information is not disclosed. Firms would also be required to apply their audit function to these media policies and procedures internally, to determine if the procedures are effective. Moreover, the SEC, FINRA and the states may begin to regulate these types of social media in amore forceful manner.
As such, although social media venues may present certain benefits, the risk is palpable.