SEC Provides Guidance on Testimonials and Social Media

CW Logo SmallDear Friends,

On March 31, 2014, the SEC issued Guidance regarding Rule 206(4)-1(a)(1) of the Investment Advisers Act (“the testimonial rule”) and social media.

The SEC generally prohibits client testimonials. However in its guidance, the SEC said client testimonials on independent social media sites are permissible, in certain circumstances, with the following important considerations:

  • An investment adviser (“IA”) or investment advisory representative (“IAR”) may publish all unedited testimonials about the IA or IAR from an independent social media site on the IA’s or IAR’s own social media site.
  • The social media site must be independent with no material connection to the IA or IAR, meaning the IA or IAR provides no compensation for an author of the commentary, and has no way to prioritize, remove, edit or influence its content.
  • An IA or IAR may not provide a subjective analysis of any commentary.
  • An IA may publish commentary from a social media site that also features the IA’s advertising if the advertisement is easily recognizable as a sponsored statement, and advertising revenue did not influence the commentary.
  • An IA or IAR may publish an advertisement containing a partial client list, friend list or contact list, if there is no inference that the contacts experienced favorable results.
  • An IA or IAR may publish an article by an unbiased third party regarding the IA’s performance if it does not include a testimonial.
  • The SEC cautions IAs to carefully consider the applicability of advertising provisions when including hyperlinks to a community, fan or other third party site, particularly if the site does not meet the material connection and independence conditions.

Please click here to view the complete text of the guidance update.

Please feel free to contact us with any questions at (212) 867-0200 or e-mail us at

Thank you,


About CounselWorks LLC

CounselWorks is a strategic business and regulatory consulting firm, that provides project-based consulting and manages compliance and regulatory programs for hedge funds, private equity firms, investment companies, broker-dealers and investment banks.
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