The SEC recently announced it has adopted amendments to Form ADV and the Advisers Act books and records rule, to provide investors and the SEC itself with a better understanding of the risk profile of each advisor and the overall industry.
Any registered investment advisor filing an initial Form ADV or an amendment to an existing Form ADV on or after October 1, 2017 will be required to provide responses to the adopted form revisions.
However, advisors need to start preparing now for these form revisions ─ and especially for the SEC’s new requirement that RIAs disclose their firm’s social media platforms in Section 1.I of Schedule D in Form ADV.
This one change in particular signifies a big shift in the way that the SEC will approach and evaluate an advisor’s risk profile.
Why is this a big change?
Up until now, advisors only needed to list their corporate websites on Form ADV. However, advisors are now also required to list all of their corporate social media accounts. This includes corporate social media pages and other publicly-available, business-related profiles on LinkedIn, Twitter, Facebook, and so on.
What may seem like a minor addition to Form ADV actually has major implications for an advisor’s compliance procedures and risk exposure. That’s because the specific inclusion of social media signifies the SEC will more heavily scrutinize an advisor’s corporate social media accounts during an examination or audit, like the regulator does with corporate websites.
The SEC states this clearly in its final Form ADV and Investment Advisers Act Rules:
Just like website content, for SEC audits and examinations will continue to increase their focus on social media.
What can advisors do to prepare?
Now that social media accounts are under the microscope, it’s critical that advisors archive and supervise their corporate social media accounts. The SEC will be asking for an advisor’s corporate social media records, so firms need to think about finding the most efficient and thorough way to retain and produce that content.
Firms that use a comprehensive archiving platform will be well positioned to retain and produce social media alongside other frequently requested communication records like emails or website content. What if the SEC asks for the website and Facebook content of a specific advisor between the dates of January 20, 2016 through February 15, 2016? With a comprehensive archive, those records can be located and produced quickly, along with any emails exchanged with clients or prospects. The SEC will be able to see the context, timing and additional details related to communication between a prospect/client and an advisor. For instance, if a conversation starts on a website, moves to email, and concludes on Facebook, records within a comprehensive archive will help show the progression of an advisor’s interaction across multiple content channels.
It doesn’t matter if an advisor uses Facebook, Twitter, LinkedIn, or any other publicly-available social media platform to communicate with clients and prospects. All are fair game for inspection.
A global client base, including the top 10 banks in the United States and the largest banks in Europe, Canada and Asia, manages billions of conversations each month with the Smarsh Connected Suite. Government agencies in 40 of the 50 U.S. states also rely on Smarsh to help meet their recordkeeping and e-discovery requirements.
The company is headquartered in Portland, Ore. with nine offices worldwide, including locations in Silicon Valley, New York, London and Bangalore, India. For more information, visit www.smarsh.com.
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