Massachusetts Regulators Suggest Disclosure For Advisors Whose Clients "Like" Them

Thursday, January 19, 2012 09:15
Massachusetts Regulators Suggest Disclosure For Advisors Whose Clients

Tags: Social Media

After an exhaustive study, the Massachusetts Securities Division has concluded that state-regulated advisors can use social media as long as they treat the communications as advertising -- and are mindful of the interactive nature of the format.

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In general, the state's guidelines follow the SEC's lead in classifying Facebook posts, Tweets, and other online public messaging as advertising.


But given its rich technological base, Massachusetts drills down deeper into areas of potential endorsement and selective editing.


Their regulators agree with the SEC that if a client "likes" an advisor's page or post, it could be a testimonial. But they spell out that a "like" in itself does not constitute a compliance problem:


"The purpose of the testimonial prohibition is to avoid the mistaken impression of a reader that the experience of one client is likely to be achieved in the reader’s particular circumstances.  Facebook 'likes' by themselves are not likely to give rise to such a mistaken impression."


Still, the state recommends that advisors warn clients not to post positive reviews. And disclosure should include language about how "likes" do not reflect any kind of endorsement.


The state also formally extended its guidance on when advisors "adopt" third-party content or are "entangled" in its creation to social media. In brief, if you edit or promote it, you're responsible.


Massachusetts suggests advisors review their site once a day to avoid problems. 

Comments (1)

Chris Winn
Great point on the "Like". More examples of acceptable use need to be published as this is still very gray!

Also, Massachusetts is also conducting a training for Advisors on January 31st. Call the Division for the waiting list as it is booked solid at this point.

The topics are include:
- The upcoming switch from Federal to State Investment Adviser registration
- The proper use of social media and other regulatory developments
- New requirements for advisers with custody or discretion & rules related to performance-based fees
- New exemptions for exempt reporting advisers & changes to the institutional buyer exclusion
- The Securities Division's books and records examinations process and what to expect

Hopefully you are registered or can make it. I will provide a summary following the meeting for those that cannot attend.
Chris Winn , January 19, 2012

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