5 major highlights of the SEC’s 2013 Guidance UpdateArticle added by Amy McIlwain on April 11, 2013
Amy McIlwain

Amy McIlwain

Denver, CO

Joined: August 26, 2010

Since the dawn of social media, financial services professionals have been very cautious for fear of violating compliance regulations and parameters. For guidance, companies and firms rely heavily on regulatory organizations like the SEC and FINRA. Recently, the SEC issued a new Guidance Update regarding the use of social media. This update offers more detailed information on the types of social media technologies and communications that have to be reported under FINRA.

In essence, due to an overabundance of caution, many mutual funds and other investment companies unnecessarily file materials on their social media sites with FINRA. Consequently, the agency is reiterating that not every tweet or Facebook post must be filed. Mark Walsh of Online Media Daily highlights some of the clarifications that the SEC made about social media interactions. These are types of posts that need not be filed with the agency.
  • An incidental mention of an investment company or family of funds not related to a discussion of its investment qualifications. As an example of an acceptable tweet: “Consumer Reports wrote an article where it mentions our Brand Y Rewards Card. Are you a member?”

  • Incidental use of the term “performance” in relation to discussion of an investment company or fund without specific mention of a fund’s return. For example, the word “performance” can be used as long as it’s not to promote a fund’s return: “Click on this link (website URL) where we provide full details of our yearly performance since inception.”

  • A statement unrelated to the merits of a fund that includes a hyperlink to general financial and investment information. The SEC notes a company can tweet things such as: “Here’s a Q&A with our Portfolio Manager, John Doe, regarding his views on the economy for 2013.” Or: “Gold and silver have provided a relatively low correlation to stocks and bonds over the last few years.”

  • A response to an inquiry by a social media user providing factual information without discussing the investment performance of a fund. If someone asks what the net asset value (NAV) for a certain fund is on a given day, for instance, a company can reply by giving that figure.

  • Financial service firms can talk about their products, provide links to their products and share general market commentary without needing to file this content with FINRA – just don’t tweet returns and investment merits.
In the article, the ex-Forrester analyst Augie Ray argues that the industry has been overly cautious in its approach to social media, missing opportunities to benefit customers, as well as their own businesses. He posits that there is opportunity for companies to embrace social media more aggressively. In the document, it is indicated that financial institutions may use social media for marketing, providing incentives, facilitating applications, inviting public feedback and engaging with current and potential customers.

If you are interested in seeing an example of a financial services company that is already successfully harnessing social media, check out American Express. This company has a strong social media presence and has pioneered new platforms like FourSquare.
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