Ethics and Social Media: Four Key Considerations for Investment Professionals

Social media has arrived in the investment management industry, and it is changing the way that investment professionals conduct business. Social media is the ultimate integration of technology, interpersonal interactions, and content. Facebook, LinkedIn, and Twitter, for example, allow investment professionals to develop and/or maintain clear and frequent communications with clients, prospective clients, and peers. Blogging enables investment professionals to educate as well as promote their services to a broader and more diverse audience in a more timely and cost-efficient manner. Although social media offers myriad opportunities and benefits, it also comes with both risks and responsibilities for its users.

In the United States, the Financial Industry Regulatory Authority (FINRA) and the Securities and Exchange Commission (SEC) have been proactive in providing guidance to the investment industry about the use of social media in order to ensure compliance with U.S. securities laws (Securities Act of 1933, Securities and Exchange Act of 1934, and Investment Advisers Act of 1940). The SEC’s broad definition of social media includes “blogs, microblogs, wikis, photos and video sharing, podcasts, social networking, and virtual worlds.”

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