The ultimate guide to RIA social media compliance in 2023

Social media is one of the simplest ways for a registered investment adviser (RIA) firm to build their brand. It’s free, it’s easy and it’s ripe with opportunity.

But it can also be dangerous for advisers who don’t know what they’re doing. Indeed, among many changes, the newly updated Marketing Rule revised Form ADV to require additional detail about an RIA’s marketing practices. This information will undoubtedly be factored into regulators’ examination and enforcement methodology.

And when it comes to social media, the Securities and Exchange Commission (SEC) is always watching – and so is the public. You could get huge fines or have your reputation ruined if you’re not careful. Which is why it’s so important you and your team understand how to use social media effectively – and compliantly.

Seven tips for RIA social media compliance

These seven tips for advisory firms can help ensure your social media efforts are successful and within the SEC’s regulatory guidelines.

1. Know the rules on client testimonials

In years past, advisers lived by the old Advertising Rule, which forbade client testimonials in all forms of marketing and advertising. However, the SEC’s updated Marketing Rule, which went into effect on Nov. 4, 2022, has turned that prior guidance on its head.

The Marketing Rule now allows for the use of client testimonials and endorsements after meeting specific requirements. While a “testimonial” generally covers statements from a client, an “endorsement” is defined as “any statement by a person other than a current client or investor in a private fund advised by the investment adviser that:

• • Indicates approval, support or recommendation of the investment adviser or its supervised persons or describes that person’s experience with the investment adviser or its supervised persons.
  • Directly or indirectly solicits any current or prospective client or investor to be a client of, or an investor in a private fund advised by, the investment adviser.
  • Refers any current or prospective client or investor to be a client of, or an investor in a private fund advised by, the investment adviser.”

While the new rule doesn’t give free reign for advisers to post whatever they please, it does mean advisers can allow user comments on the RIA’s social media pages. Keep in mind, while this could increase user engagement, it also will require more prudent monitoring and archiving.

2. Archive everything

Social media isn’t exempt from archiving requirements. In fact, all social media posts and activity should be archived, across all platforms your firm uses. Work with your cybersecurity and compliance teams to find a process or automated platform for secure and accurate archival methods.

It’s also a good idea to document exactly who has access to your accounts, via what devices and for what purposes. Comprehensive documentation can be helpful in preventing fraudulent activity as well as for compliance purposes.

3. Don’t mislead

Like other forms of advertising, it’s important to eschew any statements or even omissions which could be misleading to your audience.

Avoid any guarantees, such as a promise – express or implied – of certain portfolio performance. In addition, stay away from any statements which are dubious or which you otherwise are not certain to be true. In general, having a member of your compliance team proofread your social media posts for any red flags is a great way to steer clear of regulatory violations.

4. Be aware of cybersecurity

Social media is a common preying ground for hackers and scammers. To avoid any data leaks or compromised accounts, it’s important to have a robust cybersecurity plan in place.

In addition to password protection and securing user devices, you should also make social media best practices a part of your regular cybersecurity training for all employees. This includes ensuring sensitive personal, client or employee details are not shared via social platforms – especially any details which could facilitate a social engineering hack.

5. Develop and follow a social media strategy

The best marketing efforts are based on a well-thought-out strategy. A social media strategy can include goals for each platform, as well as messaging you wish to include, amount of posts per week, target audience and so on.

Moreover, a social media strategy can assist in identifying potential risks to be addressed by relevant policies and procedures.

6. Implement social-specific policies and procedures for all employees

Procedures should be put into place to keep records, review content and specifically address the use of social media at the firm level and at the individual account level. Should employees interact with audience commentary on the firm’s account? Should personal employee accounts tout the RIA’s services? Having clear answers to questions like these can help avoid potential conflicts of interest or security issues.

In addition, a policies and procedures manual should address steps for employees to take should they suspect a social-based cybersecurity threat.

7. Treat social media posts just like any other form of advertising

You wouldn’t create a case study or blog post without a compliance review, and the same rules apply to your social media content. Each post is a direct reflection of your firm – so taking the time to have an extra set of eyes on each post before you publish is worth the effort.

Done correctly, leveraging social media marketing at your RIA firm has the potential to boost your client engagement, connect with prospects and even raise brand awareness. But before you jump into your next social media campaign, it’s best to have preventative steps and sound compliance strategies in place.