Q&A with Tara LaClair
Federal SEC guidelines regulate
testimonials via social media
Q: The U.S. Securities and Exchange Commission recently published a guidance update regarding the testimonial rule and social media. What are the details?
A: Under The Investment Advisers Act of 1940, the so-called testimonial rule prohibits advisers from publishing, circulating or distributing any advertisement that refers to or contains a testimonial concerning a financial adviser or the services rendered by a financial advisor. While the SEC hasn’t defined the term testimonial in any rule, it consistently has been interpreted to mean a statement of a client’s experience with, or endorsement of, an investment adviser. The SEC’s recent guidance update primarily was released to clarify whether or under what circumstances a financial adviser can publish a testimonial written about them on a third party social media site.
Q: What is the impact for consumers?
A: Consumers should feel more confident that any testimonial they see in an advertisement for an adviser has been provided in its complete form and without being altered or edited by the adviser to serve the better interest of the investment adviser.
Q: What is the impact on financial advisers?
A: This guidance impacts financial advisers in that it allows them, under specific circumstances, to publish testimonials that were published on third party social media sites in an advertisement providing that (1) the content is independent of the investment adviser; (2) there is no material connection between the social media site and the investment adviser; and (3) the investment adviser has published all unedited comments appearing on the independent social media site regarding the investment adviser.
PAULA BURKES, BUSINESS WRITER