Compliance FAQ: RIA Disclosure of Social Media Accounts

In this month’s article, Lexington Compliance alerts RIA firms about an upcoming requirement to disclose social media accounts on the Form ADV.

As part of the Securities and Exchange Commission’s (SEC) new FORM ADV filing requirements* taking effect on October 1, 2017, registered investment adviser (RIA) firms will be required to disclose all social media pages (e.g. Twitter, LinkedIn, Facebook, etc.) for which the "adviser controls the content" on "publicly available social media platforms." The firm will not be required to disclose details on individual social media pages for individual staff members. The SEC staff notes that this new requirement will help them prepare for examinations, track continuity of advertising messaging across various platforms, and identify new social media platforms.

Form ADV Changes Taking Effect on October 1, 2017

Beginning on October 1, 2017, when an RIA firm files a Form ADV amendment, the firm will need to provide additional information related to social media usage. Item 1.I. of the Part 1A will now read:

Do you have one or more websites or accounts on publicly available social media platforms (including, but not limited to, Twitter, Facebook and LinkedIn)?

If “yes,” list all firm website addresses and the address for each of the firm’s accounts on publicly available social media platforms on Section 1.I. of Schedule D. If a website address serves as a portal through which to access other information you have published on the web, you may list the portal without listing addresses for all of the other information. You may need to list more than one portal address. Do not provide the addresses of websites or accounts on publicly available social media platforms where you do not control the content. Do not provide the individual electronic mail (e-mail) addresses of employees or the addresses of employee accounts on publicly available social media platforms.

Each applicable social media platform address will need to be listed in the revised Section 1.I. of the Schedule D which will now read:

List your website addresses, including addresses for accounts on publicly available social media platforms where you control the content (including, but not limited to, Twitter, Facebook and/or LinkedIn). You must complete a separate Schedule D Section 1.I. for each website address or account on a publicly available social media platform.

New Form ADV FAQ SEC Staff Guidance

On June 12, 2017, in preparation for the upcoming Form ADV changes, the SEC staff released new Form ADV FAQs related to the forthcoming social media platform disclosure requirements:  

Q: Does an adviser have to report the address of an account on a publicly available social media platform where an unaffiliated third-party distributor or solicitor controls the content?

A: No. An adviser should not provide the address of websites or accounts on publicly available social media platforms where the adviser does not control the content. As discussed in the adopting release, to the extent an account is used to promote the business of an adviser registered with the Commission and the adviser controls the content, the account should be reported. See Form ADV and Investment Advisers Act Rules, Investment Adviser Act Release No. 4509 at p. 34-39 (August 25, 2016). Moreover, Schedule D, Section 1.I of Form ADV specifies that the only website addresses that should be reported are ones where the adviser "controls the content." (Posted June 12, 2017)

Q: Information about my advisory firm is included on an account on a social media platform where a third party controls the content. The platform provides job listings and enables the public to rate and review companies. Should I include the address of that account for purposes of Item 1.I?

A: No. You should not provide the address of websites or accounts on social media platforms where the adviser does not control the content. (Posted June 12, 2017)

Q: The parent company of an adviser created and maintains a social media account that references the business of the adviser. Should the adviser report the address of that account for purposes of Item 1.I?

A: It depends. An adviser needs to provide only the addresses of websites or accounts on publicly available social media platforms where the adviser controls the content. Whether an adviser controls the content of such an account depends on the facts and circumstances. For example, the staff believes that if the adviser provides content for the account and is aware that its parent company uses the account to promote the adviser’s business, then the adviser may be in control of the content and therefore would have to report the account's address. On the other hand, if such an account merely mentions the adviser as one of the parent company’s subsidiaries, but is not used to promote the adviser’s business, then the adviser may not be in control of the content and therefore could omit reporting the account's address. (Posted June 12, 2017)

Q: Should the adviser report the address of an employee’s account on a publicly available social media platform if the adviser controls the content of the account?

A: No. For purposes of Item 1.I, an adviser is required to list the address for each of the firm’s accounts on publicly available social media platforms. As discussed in the adopting release, this item is not intended to extend to the social media accounts of an adviser’s employees regardless of whether the adviser controls the content of such accounts. See Form ADV and Investment Advisers Act Rules, Investment Adviser Act Release No. 4509 at p. 35 (August 25, 2016). (Posted June 12, 2017)

In preparation for the upcoming Form ADV changes,* RIA firms should review the use of all firm-level social media platforms to identify which platforms will need to be disclosed on the Form ADV. An RIA firm that files a Form ADV amendment on or after October 1, 2017 should be prepared to disclose all relevant social media platforms. Presently, regulator review of social media accounts is often a key element of an investment advisor regulatory exam. With these new Form ADV changes, advisory firms should anticipate increased social media usage scrutiny as it becomes easier for regulators to track and review the use of social media. All RIA firm principals and Chief Compliance Officers should also review prior guidance released in March 2014 by the SEC Division of Investment Management on RIA social media usage and the applicability of the testimonial rule.

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