Social Media & Electronic Communications
Modern communications technology requires advisers to maintain compliance across all digital platforms. The same rules that apply to traditional advertising apply to social media and electronic communications.
Social Media Compliance Framework
Core Principles
Social media posts are subject to the same regulatory requirements as traditional advertising:
- Must not be misleading or deceptive
- Must be fair and balanced
- Must include required disclosures
- Must be supervised and approved
- Must be archived and retained
Types of Social Media Content
| Content Type | Regulatory Treatment | Pre-Approval Required? |
|---|---|---|
| Static Content | Treated as advertising | Yes—principal approval |
| Interactive Posts | May be treated as correspondence | Generally no |
| Third-Party Shares/Likes | May constitute adoption | Case-by-case basis |
| Private Messages | Correspondence | No, but must supervise |
Adoption and Entanglement
Adoption: When an adviser "likes," shares, or republishes third-party content, the adviser has adopted that content and becomes responsible for its compliance with advertising rules.
Entanglement: If an adviser is involved in preparing content that appears to come from a third party, the adviser is "entangled" with that content.
| Action | Regulatory Consequence |
|---|---|
| Liking a client testimonial | Adoption—adviser is responsible for content |
| Sharing an article without comment | May be adoption depending on context |
| Helping client write review | Entanglement—treated as adviser's own communication |
| Ignoring negative comments | Generally acceptable; not adoption |
Recordkeeping Requirements
Books and Records Rule
Investment advisers must retain records under Rule 204-2 of the Investment Advisers Act.
| Record Type | Retention Period | Accessibility |
|---|---|---|
| Advertisements | 5 years | First 2 years in accessible location |
| Electronic Communications | 5 years (from creation) | First 2 years readily available |
| Client Correspondence | 5 years | Organized and retrievable |
| Social Media Posts | 5 years from last use | Must capture complete record |
What Must Be Archived
All communications relating to the adviser's "business as such":
- Emails to/from clients and prospects
- Text messages about advisory services
- Social media posts (both public and private)
- Webinar recordings
- Blog posts and website content
- Chat/messaging communications
Non-Business Communications
Communications that are purely personal and have no connection to the adviser's business need not be retained, but distinguishing between personal and business communications can be challenging.
Supervision Requirements
FINRA Rule 3110 (for Dual Registrants)
Broker-dealers and their associated persons must be supervised, including electronic communications.
SEC Compliance Program Requirements
Advisers must have:
- Written supervisory procedures for electronic communications
- Regular review of communications
- Training on appropriate social media use
- Clear policies on personal vs. business accounts
- Approval process for marketing materials
Pre-Approval Requirements
| Communication Type | Pre-Approval Status |
|---|---|
| Advertisements | Required—principal must approve |
| Marketing materials | Required |
| Performance claims | Required |
| Testimonials | Required |
| Real-time interactive posts | Generally not required (but supervised) |
| Client correspondence | Generally not required (but supervised) |
Privacy and Data Protection
Regulation S-P
SEC Regulation S-P requires investment advisers to:
- Provide initial privacy notice at account opening
- Provide annual privacy notice (with exceptions)
- Give opt-out rights for information sharing
- Safeguard customer information
Privacy Notice Contents
Required information includes:
- Categories of nonpublic personal information collected
- Categories of information disclosed to third parties
- Categories of third parties receiving information
- Description of security policies
- How to opt out of information sharing
Cybersecurity Requirements
Investment advisers should have written policies addressing:
- Protection of client data
- Incident response procedures
- Regular risk assessments
- Employee training
- Vendor due diligence
On the Exam: Remember that social media is subject to the same rules as traditional advertising. "Liking" a client testimonial constitutes adoption of that content. Electronic communications must be retained for 5 years, with the first 2 years in an accessible location.
Key Takeaways
- Social media posts are subject to same rules as traditional advertising
- Liking/sharing third-party content may constitute "adoption"
- Electronic communications must be retained for 5 years
- First 2 years must be in an accessible location
- Privacy notices must be provided at account opening
An investment adviser's social media posts are:
Electronic communications by investment advisers must be retained for:
When an investment adviser "likes" a client's positive review on social media, the adviser has:
17.3 Client Agreements & Disclosure
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