Investment advisers can now publish consumer reviews of their services on their websites and social media channels provided both positive and negative comments are included, the SEC said.
Under the guidance issued by the SEC's Division of Investment Management, in certain circumstances, an investment adviser's or investment advisory representative's publication of all of the testimonials about them from an independent social media site on their own social media site or website would not violate the testimonial rule within the Investment Advisers Act of 1940.
Some of the circumstances include when an investment adviser or IAR has no ability to affect which public commentary is included or how the public commentary is presented on an independent social media site, the SEC said.
The reviews would also be permitted when the commentators' ability to include the public commentary is not restricted and where the independent social media site allows for the viewing of all public commentary and updating of new commentary on a real-time basis.
The SEC said the publication of public commentary from an independent social media site would not raise any of the dangers that the Investment Advisers Act of 1940 prevents if:
- the independent social media site provides content that is independent of the investment adviser or IAR;
- there is no material connection between the independent social media site and the investment adviser or IAR that would call into question the independence of the independent social media site or commentary;
- the investment adviser or IAR publishes all of the unedited comments appearing on the independent social media site regarding the investment adviser or IAR.
“The SEC's recent guidance represents a major breakthrough for consumers,” said Odysseas Papadimitriou, CEO of WalletHub, a website that enables consumers to review financial advisers.
He added, “We are now free to compare the professionals who manage our money with the same level of discerning and transparency that has long been available in other segments of the retail market – from restaurants to consumer electronics.”
The SEC's latest announcement comes on the heels of an initiative launched in February aimed at investment advisers who have not been examined since registering with the agency.
As part of the initiative, the SEC's Office of Compliance Inspections and Examinations will concentrate on the advisers' compliance programs, filings and disclosure, marketing, portfolio management and safekeeping of client assets.
Starting later this year, the OCIE will invite SEC-registered investment advisers who have yet to be examined to attend regional meetings where they can learn more about the examination process, the SEC said.
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