Make social media part of your compliance plan

September 22, 2009 — 4:43 PM UTC by Les Abromovitz


As someone who writes about compliance issues for registered investment advisers (RIA), I tend to come across sounding a bit negative. At speeches and conferences for RIAs, I joke that my mission is to suck the creativity out of their advertisements and marketing campaigns. The joke doesn’t get much of a laugh so it’s either my delivery, which is a distinct possibility, or the fact that compliance issues can stop a brilliant marketing campaign in its tracks.

If you read my previous article dealing with the potential compliance pitfalls associated with the use of social media, you may feel I am discouraging RIAs from using it to communicate with clients and prospective clients. In fact, my goal is merely to encourage RIAs to err on the side of caution when they use Twitter, Facebook, Linkedin or other such websites.

Whether an advisor uses social media as a marketing tool — or just to communicate with existing clients – I want their firms to realize that they are required to adopt and implement written compliance policies and procedures that address the use of social media by the firm, as well as its investment adviser representatives (IARs).

Here are 10 specific points:

1. Policies and procedures must be tailored to how a firm uses social media. Regulators frown on the use of boilerplate ones. Those procedures should require your firm’s chief compliance officer (CCO) to monitor IARs’ use of social media. If a firm does not permit the use of social media for business purposes, that prohibition should be clearly stated in the RIA’s policies and procedures.

2. One Best Practice is to require your firm’s IARs and associated persons to sign forms stating that they are aware of this prohibition.

3. It is also a good idea for CCOs, or a designee, to independently investigate whether IARs and other individuals are making good on that promise.

4. If advisors are using social media as a marketing tool, that person must comply with advertising policies and procedures. It is a Best Practice for an RIA’s advertising policies and procedures to require the firm’s CCO to approve all advertisements before they are published, sent, or posted on the firm’s website. There should be no exception for social media.

5. Social media such as Facebook allow RIAs and other advertisers to post ads on profiles that appear in response to specified demographic information. CCOs should pre-approve the marketing messages utilized, as well as the content of the advertisements. Meta tags and keywords should also be reviewed by the firm’s CCO prior to their utilization and must not be false or misleading in any way. I only found out recently that meta tags were hidden text and not the name of heavy metal rock group.

6. Policies and procedures should also mandate that communications and advertisements using social media must be retained in accordance with the Books and Records Rule. Policies and procedures should distinguish between social media used for purely personal reasons and business uses. h2. Banning non-business social media is no regulatory panacea

7. An outright ban on non-business use of social media may present its own legal problems. Questions will inevitably arise as to whether social media is being used for social networking purposes or to market advisory services. For example, examiners may ask whether an IAR intends for their profile on LinkedIn to attract clients or for personal reasons, such as staying in touch with old friends or to pursue other employment. All restrictions on the use of social media should be reviewed with the RIA’s legal counsel.

8. Examiners are likely to look at how advisors use social media as much as their intent for social networking or business. For example, a profile that simply lists the name of the firm where an IAR works is less likely to be viewed as an advertisement than one where the individual details his or her achievements and the services offered by the company. IARs and other members of an RIA should refrain from any overt or subtle reference to their firm’s performance in LinkedIn profiles or when using other types of social media.

9. All client communications and advertisements using social media must be readily available for CCO review. RIAs should test their ability to retrieve all of these communications and advertisements. All content must be retained for five years as stipulated by the Books and Records Rule.

10. All instant messages and tweets to clients and prospective clients should be captured on the RIA’s server, or by an archiving service, and retained in accordance with the Books and Records Rule. Profiles and other forms of social media that are related to an RIA’s advisory services must also be retained for the requisite time frame.

Writer’s note: Does it sounds like I’m encouraging you to use social media then throwing down the gauntlet? I don’t mean to come across in that self-contradictory way. The truth is that in today’s regulatory environment, staying compliant in your practice is a complex and painstaking process, period. The use of social media – seemingly an afterthought — must be incorporated into how you handle this task. Social media can be a powerful new means of running and growing your business. I hope the 10 points I outline here make the regulatory challenge concrete enough to take in stride.

Les Abromovitz is a senior consultant for National Compliance Services, Inc. ( Les, an attorney, is the author of Growing Within the Lines: The Investment Adviser’s Advertising and Compliance Guide. He can be reached at 561-330-7645, Ext. 213, or

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