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News February 14, 2011 Issue

Social Media Sweep Underway

Got your social media policies in order? Late last month the SEC launched a sweep on the social media and social networking practices and policies of advisers. If your policies and procedures could use some work, the list of items of interest to the SEC is a great check on what you may or may not be missing.

The power of social media has never been more evident than in the recent ouster of Egyptian President Hosni Mubarack by Egypt’s citizenry. The (relatively) peaceful regime change is said to have started in a groundswell of text messages, Tweets, and calls to action on Facebook.

At about the same time as the revolution was getting under way, the SEC began distributing requests to advisers focusing on the following:

  • Whether the adviser makes use of or permits the use of social media, and if so, which social media outlets and to what extent;
  • The adviser’s policies and procedures with respect to the use of social media and social networking websites, including those related to the posting of communications and information, any ongoing monitoring or review process, and policies with respect to non-business use of social media by employees;
  • How advisers document or record any communications they make or receive;
  • Third-party communications posted on behalf of an adviser or on social media sites maintained by an adviser (a LinkedIn profile, for example), and what controls the adviser maintains for monitoring and review of third-party communications;
  • Internal training and education for employees regarding both business and personal use of social media;
  • Documentation regarding any disciplinary actions taken for use of social media by employees; and
  • The adviser’s record retention policies in connection with its or its employees’ use of social media, and the record retention policies of any third party that manages the adviser’s use of social media.

The SEC is requesting information for a wide variety of social media, everything from Facebook and LinkedIn to YouTube, AdvisorTweets.com, and blog pages.

ACA Compliance Group first observed the social media exam focus and believes the sweep’s primary purpose is as a means for the SEC to review this evolving area. "The requests are broad," said ACA, "and will enable the SEC to evaluate how prevalent this activity is to registered investment advisers and whether it needs to dedicate further rulemaking and/or examination resources to complete a more regular and thorough evaluation of this activity."

The SEC does not comment on its specific examination activities.

Here’s a reprint of what at least one of the letters requests:

Please produce the following documents within [Adviser]'s possession or custody or subject to [Adviser]'s control for the period January 1, 2010 to the present:

1. All documents sufficient to identify [Adviser]'s involvement with or usage of social media websites, including, without limitation:

  • Facebook;
  • Twitter, including, without limitation, AdvisorTweets.com;
  • LinkedIn;
  • LinkedFa;
  • YouTube;
  • Flickr;
  • MySpace;
  • Digg;
  • Reddit; RSS; and
  • Blogs and micro-blogs;

2. All documents concerning any communications made by or received by [Adviser] on any social media website, including, without limitation, snapshots of documents responsive to Item 1, above;

3. All documents concerning [Adviser]'s policies and procedures related to the use of social media web sites by [Adviser], including, without limitation:

  • All policies and procedures concerning any communication posted on any social media website by [Adviser];
  • All policies and procedures concerning any prospective communications to be posted on any social media website by [Adviser]; and
  • All policies and procedures concerning any ongoing monitoring or review process related to communications posted on any social media website by [Adviser];

4. All documents concerning [Adviser]'s policies and procedures concerning a third party's use of any social media website maintained by [Adviser], including, without limitation:

  • All policies and procedures concerning any communication posted by a third party, including, without limitation, actual or prospective clients of [Adviser], on any social media website maintained by [Adviser];
  • All policies and procedures concerning any approval processes for prospective communications to be posted by a third party, including, without limitation, actual or prospective clients of [Adviser], on any social media website maintained by [Adviser]; and
  • All policies and procedures concerning any ongoing monitoring or review processes related to communications posted by a third party, including, without limitation, actual or prospective clients of [Adviser], on any social media website maintained by [Adviser];

5. All documents concerning [Adviser]'s policies and procedures related to the use of social media websites by [Adviser]'s personnel for personal, non-business related matters;

6. All documents concerning [Adviser]'s personnel training and education related to the use of social media websites by [Adviser], whether for personal, non-business related, or business related matters;

7. All documents concerning any informal or formal disciplinary action of [Adviser]'s personnel related to the use of social media for personal, non-business related, or business-related reasons; and

8. All documents concerning [Adviser]'s record retention policies and procedures concerning the involvement with or usage of, whether for personal, non-business related, or business-related matters, any social media website maintained by [Adviser] by:

  • [Adviser];
  • [Adviser]'s personnel; or
  • Any third party.