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Bailey McCann, Opalesque New York:

The Securities and Exchange Commission (SEC) has released new guidance letting investment funds and advisors use social media to promote client reviews. The guidance seeks to assist investment managers in developing compliance policies and procedures reasonably designed to address marketing through social media.

The Investment Advisers Act of 1940 generally prohibits most investment firms from using social media to circulate client testimonials, however the act was obviously written before investors and funds could use social media. The move follows a slight loosening of public information rules in general, in which the SEC has started to allow some basic public statements to be made over social media.

A client alert from Schulte Roth & Zabel explains the details around the new guidance - "whether public commentary on a social media site is a testimonial depends upon all of the facts and circumstances relating to the statement. The SEC has stated that an investment manager's publication of an article by an unbiased third party regarding its investment performance is not a testimonial, unless it includes a statement of a client's experience with or endorsement of the investment manager. The SEC also has stated that an investment manager's advertisement that includes a partial client list that does no more than identify certain clients of the investment manager cannot be vi......................

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