Guidance Update: The SEC Issues New Guidance on Investment Advisers Use of Testimonials via Social Media

The SEC recently issued new guidance concerning investment advisers use of social media, specifically within the context of public commentary appearing on third party “adviser review” websites. Generally, testimonials (statements of a “client’s experience with, or endorsement of, an investment adviser”) are forbidden in investment adviser advertisements because they can implicate false or misleading information to customers. Under the new guidance, however, investment advisers may utilize public commentary from independent third-party social media sites without implicating the concerns underlying the Testimonial Rule. Nonetheless, the SEC imposes certain restrictions. For example, investment advisers cannot compensate an independent social media website to publish or suppress a client comment, and the adviser cannot be involved (directly or indirectly) in the drafting of the commentary. Please see http://www.sec.gov/investment/im-guidance-2014-04.pdf for additional information and let us know if you have any questions.