The Division of Investment Management of the Securities and Exchange Commission (SEC) has issued guidance for registered investment advisers and their representatives on using testimonials from independent third-party social media sites. The limited amount of social media guidance for “regulated” industries from their various regulators has made the broad use of social media challenging.


The SEC’s guidance is a welcome step forward and adds to the growing body of regulatory guidance for social media usage in the financial services sector. All participants in the financial services industry should develop or carefully review their social media policies and procedures to ensure compliance with the specific requirements set forth in the guidance.


The use of social media by consumers has skyrocketed, and the interest of investment advisers and investment advisory representatives (IARs) in using social media also has grown. The division said that it decided to issue its guidance, in the form of nine questions and answers, to clarify application of the testimonial ruleunder the Investment Advisers Act of 1940 as it relates to the dissemination of genuine third-party commentary that could be useful to consumers.  That rule previously prohibited the use of most testimonials, which were viewed as misleading because they inherently promoted favorable comments while ignoring the unfavorable ones.

Now, an investment adviser or IAR  can publish testimonials on its website or social media site if it obtains the testimonials from an independent social media site and publishes all of them – both favorable and unfavorable –  without editing, analyzing, sorting or otherwise manipulating them to emphasize some over others.


The guidance begins with a reminder that an investment adviser or IAR generally may not publish public commentary that is an explicit or implicit statement of a client’s experience with or endorsement of the investment adviser or IAR on the investment adviser’s or IAR’s own social media site.

The guidance then declares, however, that an investment adviser or IAR may publish public commentary on its own internet or social media site that comes from an independent social media site if:

  • The independent social media site provides content that is independent  of  the  investment adviser or IAR;
  • There is no material connection between the independent social media site and the investment adviser or IAR that would call into question the independence of the independent social media site or commentary; and
  • The investment adviser or IAR publishes all of the unedited comments appearing on the independent social media site regarding the investment adviser or IAR.LERT


According to the guidance, content is not “independent” if an investment adviser or IAR “directly or indirectly authored the commentary on the independent social media site,” whether in their own name, a third party’s name, or an alias, assumed, or screen name.

The guidance also explains that an investment adviser or IAR would have a “material connection” with a site or commentary if the investment adviser or IAR:

  • Compensated a social media user for authoring the commentary; or
  • Prioritized, removed, or edited the commentary.

An investment adviser or IAR could, however, post an advertisement on an independent social media site without compromising its ability to publish the testimonials appearing on the social media site on its own website if the material connection and independence requirements are maintained and the advertisement is easily recognizable as a sponsored statement.


subset of the testimonials. The guidance adds that they may publish testimonials in a content-neutral manner, such as by chronological or alphabetical order, if positive and negative commentary is given  equal prominence.  They also may facilitate a user’s viewing of the commentary by providing a sorting mechanism as long as they do not sort the commentary themselves.


In addition, the guidance provides that an investment adviser or IAR  may publish testimonials from an independent social media site that include a mathematical average of  the public commentary, but only if commenters themselves rate the investment advisers or IARs based on a ratings system that is not designed to elicit any pre-determined results that could benefit any investment adviser or IAR and neither the independent social media site, the investment advisor nor the IAR provides any analysis of the commentary.


A list or photographs of “friends” “or “contacts” on an investment adviser or current or past clients of an IAR, but simply are listed by the social media site as accepted contacts or friends of the IAR in the ordinary course. The guidance also generally permits a third party’s creation and operation of unconnected community or fan pages.


Finally, the guidance provides that an investment adviser or IAR may identify independent social media sites where public commentary may be found in its non-social media advertisements, such as those in newspapers, radio, or television.

Under the guidance, an investment IAR’s social media site that is viewable adviser or IAR may publish only the totality of the testimonials from an independent social media site and may not highlight or give prominence to a by the general public generally is permitted under the guidance when the contacts or friends are not grouped or listed so as to be identified as