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.