Facebook "Likes" and SEC Social Media

With 800 Million users, Facebook is a tempting marketing platform for any small business including those in the Financial Services Industry. However with the various options for interactions that are available on Facebook, compliance concerns become more difficult to sort out.

One of the issues that creates concerns and questions involves the “Like” feature on Facebook.

On January 4^th, 2012, the SEC issued a National Examination Risk Alert - “Investment Advisor Use of Social Media” in which it addressed areas of concern regarding current social media practices. Section B covered Third Party Content including the area of Testimonials.

“. . . the (SEC) staff believes that, depending on the facts and circumstances, the use of “social plug-in” such as the “like button could be a testimonial under the Advisors Act. Third-party use of the “like” feature on an investment adviser’s social media site could be deemed to be a testimonial if it is an explicit or implicit statement of a client’s or clients’ experience with an investment adviser or IAR. If for example, the public is invited to “like” an IAR’s biography posted on a social media site, that election could be viewed as a type of testimonial” and would therefore be prohibited by rule 206(4)-1(a)(1).

There are a few opportunities to “like” content on Facebook, following are compliance guidelines to “Facebook Likes” based on our reading and research.

1. 1.      “Liking a Page”: Facebook Pages are how businesses interact on facebook. It is where they post content and engage with other facebook users. According to Socialware, “liking a Page” is the equivalent of becoming a friend, as such it does not pose any compliance issues and should be allowed and encouraged.
2. 2.      “Like a Status Update”: Liking a status update is an “endorsement” of another users post; as such this action should be blocked.
3. 3.      “Like a Status Update Comment”: This too is an endorsement of another user’s content and should be prevented by blocking this function.
4. 4.      Allowing others to “Like” your Status Updates or Comments: This could be considered a testimonial and should therefore be blocked.

There are many Compliance Solutions available, including Socialware and Smarsh, which allow you to customize your social media settings - “allowing” or “blocking” the areas or actions that are deemed appropriate - and archive your content.

Your Turn: Are you using Facebook? How are you interpreting the use of “Likes”? Are you using a Compliance Solution? If so, which one and what do you think of it?

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