Reuters logo
COMPLY-Avoiding angst over online reviews
July 2, 2012 / 5:06 PM / 5 years ago

COMPLY-Avoiding angst over online reviews

July 2 (Reuters) - Forget Facebook. Review sites such as Yelp, Angie’s List, and even online telephone books including Google Places, are creating new compliance worries for financial advisers.

Some advisers, who have barely mastered industry rules on their use of social media, are now concerned that online reviews praising their services may be considered forbidden “testimonials” or advertising - both of which are subject to securities industry regulation.

A reviewer on Yelp, for example, described one wealth management firm as having “better track records” than big brokerages and as charging lower fees.

That type of comment, say some advisers, may land them in trouble with regulators for violating rules that restrict testimonials and advertising performance results. And a bad review can damage an adviser’s reputation.

Yelp did not return calls requesting a comment.

It is all muddying the waters in an online world that is quickly expanding and still confusing to advisers. While regulators and the securities industry are heavily focused on practices related to traditional social networking sites, such as Facebook, Twitter and LinkedIn, scores of other Websites are cropping up, including those that encourage reviews.

“I‘m really tired of Internet companies that use our information,” said Aryn Sands, director of operations at Silversage Advisors in Irvine, California. “It dominoes and you can’t retract that information anymore.”

Among the biggest concerns: advisers often cannot always control whether their businesses become listed on some sites or take down reviews that appear.

Subscribers to Angie’s List, for example, can post reviews about their customer experiences with local businesses, including financial advisers, for the benefit of other subscribers. Angie’s list will remove the review only in extreme circumstances, such as when the business owner can show that the reviewer was never a customer, said spokeswoman Cheryl Reed.


Fortunately, many advisers do not have to fear a possible regulatory violation simply because someone posts a review on a third-party site, said Francois Cooke, a managing director at ACA Compliance Group in Boca Raton, Florida.

For brokers, guidance from the Financial Industry Regulatory Authority about social networking also sheds some light on concerns about third-party review sites. Brokerage industry rules make allowances for communications, such as reviews, posted by third parties on sites that advisers and brokerage firms do not control, Cooke said.

Posts from third parties on review sites should not be a problem, at least for FINRA-licensed advisers, as long as they do not become “entangled” in the conversations, Cooke said. FINRA uses the term to describe when advisers take part in those conversations, such as by responding to comments, or linking to a stellar review through their firm’s own Website. It could happen simply by retweeting a client’s Tweet about your investment savviness.

Those actions could trigger a firm’s responsibility to monitor and save the posts in accordance with industry rules, said Cooke. They could also be subject to the firm’s compliance department, which may consider it advertising, he said. Telling clients to check out reviews about you is also a no-no.


The U.S. Securities and Exchange Commission, which regulates registered investment advisers, is not as clear on the issues. Recent guidance on social networking discussed third-party posts mainly in the context of those made on the advisers’ own site. For example, a “Like” by a client on an adviser’s Facebook page may be considered a testimonial, according to recent SEC social networking guidance.

But the SEC’s broad view on testimonials leaves the agency a lot of wiggle room to consider just about anything else clients may write about their advisers online. “Whether a third-party statement is a testimonial depends upon all of the facts and circumstances relating to the statement,” SEC staff wrote in the guidance.

Advisers need to protect themselves, especially given the SEC’s hazy definition, said Scott Peterson, co-founder of Relay Station Social Media LLC, a consultancy. Think twice before setting up profiles or advertising on review sites, he said.

While a listing on Yahoo! Local, for example, may be tempting, it could have to comply with firm and industry advertising rules. The posts also may be subject to monitoring and saving, as required by industry rules. Many outside services that monitor online posts for advisers follow traditional social media sites, such as Facebook and Twitter.

Most importantly: do not ask clients to post glowing reviews about your services.

Nicholas Olesen, an adviser in King of Prussia, Pennsylvania who is affiliated with LPL Financial, said he is ultra-cautious about keeping in check with not just industry rules, but his firm’s own policies.

“I discourage clients who want to (write reviews) for me,” he said.

Our Standards:The Thomson Reuters Trust Principles.
0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below