April 1 (Reuters) - New guidance about social media from the U.S. Securities and Exchange Commission gives certain financial advisers some leeway to promote client reviews of their services that appear on third-party social media websites.
The guidance is likely to ease advisers' worries that reviews by their clients on websites such as Yelp Inc or Angie's List could violate an SEC rule that forbids "testimonials," compliance professionals said. The guidance clarifies that advisers registered with the SEC can point prospective clients to those reviews in advertisements, subject to certain conditions.
"It's a pretty big change. It should make some people happy," said Cathy Vasilev, vice president of Red Oak Compliance Solutions LLC in Fredericksburg, Texas.
The March 28 guidance is the latest step in a years-long effort by regulators to weigh in on how financial advisers and their firms can engage with clients online without running afoul of industry rules on advertising and communicating with the public.
The SEC clarified that client reviews do not violate its ban on client testimonials as long as they appear on independent social media or review sites. Those sites, however, must let viewers see all public comments, whether good or bad, related to the adviser, it said. Advisers must have no sway or control over the comments.
For example, the reviews cannot appear in Facebook pages that advisers create to promote their own businesses. Directing employees to write reviews or promising discounts to clients in exchange for positive reviews could spell trouble, the SEC wrote.
Restrictions apply to using social media reviews in print, radio and television advertisements, the SEC said. For example, advisers cannot publish verbatim reviews from the third-party sites. They can, however, direct advertising audiences to "see" the reviews on those sites.