Additional Thoughts Re: Compliance Dangers for Investment Advisers Using Social Media
Tuesday, June 16, 2009 at 6:40AM I have received many comments and questions regarding the post by Scott Gottlieb, President of U.S. Compliance Consultants. Scott has provided some additional thoughts on the compliance dangers of financial advisors using social media.
Since my original post regarding compliance dangers for investment advisers using social networking web sites such as LinkedIn and Twitter, both readers of this esteemed blog and clients of my esteemed employer, U.S. Compliance Consultants, LLC, have raised questions about other, more specific internet/advertising scenarios. Rather than respond to each individual real or hypothetical situation, I would like to posit a rule of thumb to help guide advisors with determining what may or may not run afoul of the advertising restrictions of the Investment Advisers Act of 1940. Of course, I must first offer a caveat that a “rule of thumb” has all the legal significance of “cross my heart and hope to die” or other such dictums and it is not meant to be strictly accurate or reliable for every situation.
The responses offered to the earlier post can be divided into two very broad categories. The first category covers those instances wherein the investment adviser takes no affirmative action to interact with the web site or the information in question. The second category covers situations wherein the investment adviser does have some interaction with the web site that contains the potentially prohibited material.
Clearly, an investment adviser would not to be held liable for content on those web sites that the adviser neither controls, nor is in some other manner an active participant in the life of the site. If I had to offer an analogy, this situation is akin to a magazine or newspaper publishing an unsolicited article about the adviser. Not much anyone can do about that except hope that it is positive and, if it is, frame it and put it up in the foyer of your office for all to see. However, if an adviser either controls the web site (e.g., controls the content of the site) or tacitly approves of the web site (e.g., by having an active dialogue with others through the web site) or in some other way endorses the content posted on the web site (e.g., by linking to the web site), then that is a different matter entirely. I would surmise that in such cases, regulators would be more likely to hold the adviser liable for any prohibited material posted on any such site.