Social Media Advertising and the New SEC Marketing Rule
Our blog post series on the new SEC marketing rule covers several topics, including the expanded definition of advertising, leveraging technology, testimonials and endorsements, performance advertising, hypothetical performance, third-party ratings, Form ADV and recordkeeping requirements, and reviewing and approving ads. We now wrap up the series with a discussion of social media advertising under the new rule.
Let’s examine the new rule’s social media advertising guidance and round up the main takeaways.
Back to Basics
As noted in our post introducing the new marketing rule, the new rule applies to all ads, regardless of medium. The good news is that the new rule gives advisers some guidance on social media advertising, which we cover in this post.
But as we explained in our first post in the series, advisers are responsible for understanding and implementing the rule’s open-to-interpretation principles. Advisers should carefully consider the applicable facts and circumstances and apply rule guidance to their own social media ads accordingly.
To Link, or Not to Link?
The new marketing rule permits hyperlinks to independent web pages that contain third-party content. But beware: advisers can't link to web pages they know contain untrue information.
Open for Comment?
The new marketing rule acknowledges that the act of permitting third parties to post public commentary on an adviser’s website or social media pages doesn’t, by itself, render such content attributable to the adviser as long as the adviser doesn’t selectively delete or alter the comments or their presentation and isn’t involved in the content’s preparation. The SEC believes this treatment of third-party content on an adviser’s website or social media pages is appropriate even if the adviser has the ability to influence the commentary but doesn’t exercise this authority.
The new marketing rule clarifies that simply permitting the use of “like,” “share,” or “endorse” features on a third-party website or social media platform doesn’t implicate the rule. On the other hand, if an adviser takes affirmative steps to get involved in the preparation or presentation of the comments, to endorse or approve the comments, or to edit posted comments, those comments are attributable to the adviser.
The new marketing rule also points to possible confusion about the source of social media posts when those posts are made by an adviser’s employees. Depending on the facts and circumstances, social media posts of adviser associates could be seen as adviser communications. This makes it difficult for investors to differentiate a communication made by associates in their personal capacity from a communication authorized by the adviser.
We conclude our blog post series on the new marketing rule with our own take on the SEC’s social media advertising guidance—just one of the parts of the new rule open to interpretation. For a roundup of our advice pertaining to various aspects of the new rule, stay tuned for our ultimate guide to the new SEC marketing rule.