Recently, the U.S. Securities and Exchange Commission (SEC) issued a guidance to help financial advisors determine when it is appropriate to use social media. The guidance helps to clarify Section 206(4)-1(a)(1) of the Investment Advisors Act of 1940. This section of the rule makes it unlawful to publish, circulate, or distribute any advertisement that refers, direct or indirectly, to any testimonial of any kind concerning the advisor or concerning any advice, analysis, report, or other service rendered by the advisor (i.e. the "Testimonial Rule"). Even though the SEC has not specifically defined "testimonial," they have interpreted it to mean "a statement of a client's experience with, or endorsement of, an investment advisor." According toInstitutional Asset Manager, whether public commentary on a social media site is a testimonial depends upon all of the facts and circumstances surrounding the particular situation.
Prior to this guidance, the SEC did say it was acceptable for an advisor to publish an article from an unbiased third party regarding the advisor's performance unless it includes a statement of a client's experience with, or endorsement of, the advisor. In addition, the SEC has permitted advisor's advertisements that include a partial list of advisor's clients that merely identifies the clients and nothing more.
