On January 4th, the Office of Compliance Inspections and Examinations (or ‘OCIE’) of the Securities and Exchange Commission issued a National Examination Risk Alert on Investment Adviser Use of Social Media.
While the Alert in itself is of limited direct relevance to the majority of professional services firms, it may serve as a useful bellwether for future regulatory approaches to social media.
The introductory section is worthy of particular note:
“Social media is landscape-shifting. It converts the
traditional two-party, adviser-to-client communication into an interactive, multi-party dialogue among advisers, clients, and prospects, within an open architecture accessible to third-party observers. It also converts a static medium, such as a website, where viewers passively receive content, into a medium where users actively create content.”
I don’t think I will be alone in concluding that the paragraph above may just as well be describing the professional services market.
The Alert goes on to identify factors that an RIA “may want to consider when evaluating the effectiveness of its compliance program” and actually does a pretty decent job – even drawing the important distinction between ‘personal’ and ‘professional’ social media platforms. The factors identified in the Alert include:
- Usage guidelines
- Content standards
- Approval of content
- Use of firm resources
- Criteria for approving participation
- Information Security
In my view, it’s well worth reading the Alert – which by the usual standards of SEC publications is mercifully short, at a mere seven pages – simply to get a sense of the way the wind may be blowing on social media regulation. Many of its recommendations may be little more than common sense, but I think they are no less apposite for that – particularly considering certain Bar Associations’ efforts to circumscribe social media usage in the same way as regular advertising.