Social Media and the Investment Adviser

I could write a new blog entry, but why do so when Financial Planning just wrote an excellent article on the subject.

Without question, the continued use of Facebook “likes” and LinkedIn “recommendations are the most common violations. The regulators, both the SEC and state agencies, are well aware of the problem and have made enforcement of social media violations one of their “hot spots.”

Some investment advisors have attempted to argue that since they are dually registered and registered representatives are allowed to use testimonials, such “likes” and “recommendations” are allowed. Sorry, that old “two hats” argument does not work given the ruling in the Arlene Hughes decision, where the court said dually registered reps/advisors will be held to the higher standards of advisers.

Once again, as with the fiduciary standard, advisers are held to a different standard than registered representatives. Just as with the fiduciary standard, makes no sense to have such different standards. But I’m just the messenger. Common sense would say hold all financial advisers to a fiduciary standard, which is consistent with the expressed purpose of the securities laws, and hold all financial advisers to the same social media rules. But as Voltaire said, “common sense is not so common.”

About jwatkins

I am a securities and ERISA attorney. I am a CFP Board Emeritus™ member and an Accredited Wealth Management Advisor™. I am a 1977 graduate of Georgia State University and a 1981 graduate of the University of Notre Dame Law School. I am the author of "CommonSense InvestSense: The Power of the Informed Investor" and " The 401(k)/403(b) Investment Manual: What Plan Sponsors and Plan Participants REALLY Need To Know. " As a former compliance director, I have extensive experience in evaluating the legal prudence of various types of investments, including mutual funds and annuities. My goal is to combine my legal and compliance experience in order to help educate investors on sound, proven investment strategies that will help them protect their financial security.
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