The use of social media as an advertising tool

July 21, 2009 -

Profiles in social media could be seen as advertising

I truly enjoyed your webcast “Using social media to market your practice,” which took place on July 14.

As the author of “Growing Within the Lines: The Investment Adviser's Advertising and Marketing Compliance Guide” (National Underwriter Co., 2008), I am concerned about potential violations of the advertising rule that I have noticed in LinkedIn profiles.

Aside from the testimonial issue, which has been brought up by many observers, registered investment advisers may inadvertently be violating Rule 206(4)-1(a)(2) under the Investment Advisers Act of 1940, which restricts ads referring to specific recommendations made by an investment adviser that were or would have been profitable to any person.

In addition, advisers' profiles may be construed as performance advertising, which must comply with the requirements of the Clover Capital no-action letter. Furthermore, any reference to an RIA's performance must not be false or misleading in any way.

Therefore, I strongly recommend that advisers avoid any direct or indirect reference to their firm's performance in LinkedIn profiles or when using other types of social media.

Les Abromovitz

Senior consultant

National Compliance Services Inc.

Delray Beach, Fla.