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Massachusetts state regulators weigh in on social media

As it turns out, federal securities regulators aren’t the only ones issuing guidelines on social media usage. Now states are getting in on the action.
After it surveyed the state’s 576 registered investment advisors, the Massachusetts Securities Division found that 44% of advisors use at least one social media site, like Facebook, LinkedIn, or Twitter. And yet, according to the Division, many of these social advisors are not ensuring that the proper recordkeeping and compliance procedures are in place.
Here are several key findings by the Division:

  • Yes, an investment advisor can use social media to discuss its business. However, advisors should be aware of new regulatory and compliance issues that can arise from the use of social media.
  • Social media matters to advisors because it opens up new paths of interaction and communication.
  • As a general rule, social media pages for advisors will be considered advertising. In turn, those social media pages are therefore subject to the same regulatory requirements as other forms of advertising.
  • Advisors are held accountable both for content they themselves create and (in some cases) content they either helped create (entanglement) or endorsed (adoption).
  • The Division agrees with the SEC in saying that a client “liking” an adviser’s Facebook page may in some instances, but not always, make it a testimonial. On LinkedIn, the problem is less sticky since advisors can simply choose not to accept client recommendations, once they have been trained that this violates regulations prohibiting testimonials in advertising.

Whether your advisors answer to federal or state regulations, Hearsay Social is the only provider of complete compliance and complete coverage on social media.
To learn more about these findings and others, read the Division’s letter here.

Ally Basak Russell

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