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How do LinkedIn Endorsements affect financial advisors and representatives?

Does LinkedIn’s new Endorsements feature, which allows people to endorse the skills of others, present issues for Broker/ Registered Agents pursuant to Rule 206(4) of the SEC Investment Advisers Act of 1940?
Rule 206(4) states that advertisements cannot “use or refer to testimonials” (which include any statement of a client’s experience or endorsement). This is true of advertisements in print materials and advertising on electronic forums such as LinkedIn profiles.
An endorsement or recommendation from a client could be regarded as a violation of the Advisers Act.
SEC’s staff has consistently interpreted testimonials to include a statement of a client’s experience with, or endorsement of, an investment adviser. Therefore, we believe that through the use of “social plug-ins” such as the “Endorsement” feature could be a testimonial under the Advisers Act. If your organization concludes that such legal or compliance risks require monitoring or supervision of the new endorsement feature, the Hearsay Social platform can support that objective as described below.
LinkedIn Endorsements occur in two ways. The first is an endorsement on a LinkedIn skill that already exists in a member profile. The second is by a third party initiating an endorsement for a skill that does not exist on a member profile.
In the first case, it is not yet possible for a software solution to block a third party initiated endorsement on a pre-existing skill. If an organization does not want to allow skills and endorsements, however, we suggest creating a policy prohibiting representatives from adding skills to their own profiles. Organizations can monitor whether representatives stray from this policy through various software solutions like Hearsay Social.
In the second case, if a third party initiates an endorsement, the representative of your organization must accept this endorsement prior to it surfacing as a skill on their LinkedIn profile. If an organization does not want to allow skills and endorsements, we would encourage the organization to set a policy prohibiting representatives from accepting endorsements. Again, solutions like Hearsay Social can detect all newly listed skills on LinkedIn profiles.
Finally, for endorsements that may have existed prior to a policy being in place, we suggest that brokers and/or agents hide endorsements that already have taken place (see illustration below showing how to hide endorsements) and to use the Hearsay Social Compliance solution to identify anywhere these skills/endorsements may be listed.

As always, you should consult your own legal advisors as to the application, if any, of these or any laws or regulations restricting advertisements and other communications with the public to your business.

Hearsay Social handles skills and endorsements as we do all other areas of compliance, as this functionality is supported via the LinkedIn API.

If you have any additional questions about LinkedIn endorsements, please feel free to leave a comment below or contact us directly.

Disclaimer: The material available on this blog is for informational purposes only and not for the purpose of providing legal advice. We make no guarantees on the accuracy of the information provided herein.

Yasmin Zarabi

Yasmin is responsible for Hearsay's legal affairs including commercial, compliance, regulatory and privacy matters. She is a thought leader in compliance for financial services, has been published in industry press and speaks at events around the world.

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