In March 2014, the Staff of the Division of Investment Management of the SEC published a Guidance Update regarding a registered investment adviser’s use of social media and its publication of advertisements that feature public commentary about the adviser that appears on independent, third-party social media sites. Rule 206(4)-1(a)(1) under the Advisers Act prohibits the publication, circulation or distribution of any advertisement containing a testimonial. Although the term “testimonial” is not defined in the Advisers Act or the rules thereunder, the Guidance Update notes that the Staff has consistently interpreted the term to include a statement of a client’s experience with, or an endorsement of, an investment adviser. The Guidance Update states that, in certain circumstances, an investment adviser representative’s or investment adviser’s publication of all of the testimonials from an independent social media site on its own website would not implicate the concerns underlying the testimonial rule. The Guidance Update also states that in order not to violate the testimonial rule, the publication of all of the testimonials from an independent social media site also would have to meet two conditions: (1) the independent social media site must provide content that is independent of the investment adviser, and (2) there must be no material connection between the independent social media site and the investment adviser that would call into question the independence of the independent social media site or the testimonials. The Guidance Update provides additional information in a question and answer format about the conditions, other issues related to third party commentary, the inclusion of investment adviser advertisements on independent social media sites, references to independent social media site testimonials in print advertisements, client lists and fan/community pages. The Guidance Update also notes that the Staff no longer takes the position that an advertisement that contains certain non-investment related commentary (e.g., religious affiliation or service to the community) regarding an investment adviser representative may be considered a testimonial.
The Guidance Update is available at www.sec.gov/investment/im-guidance-2014-04.pdf.