The U.S. Securities and Exchange Commission (SEC) Friday published new guidance on the use of social media by mutual funds, clarifying that it does not expect everything exchanged on social media to be filed with regulators.
The new guidance aims to clarify the obligations of mutual funds and other investment companies to seek regulatory review of materials posted on their social media sites. It notes that mutual funds are required to file certain advertisements with the Financial Industry Regulatory Authority (FINRA) for review. However, it says that “out of an abundance of caution” many funds are filing materials on their social media sites with FINRA unnecessarily.
The updated guidance provides examples of the kinds of communications that SEC staff believes should be filed with FINRA, and examples of communications that would not trigger a filing requirement. “Whether a communication need be filed depends on the content, context, and presentation of the particular communication,” it says.
And, this “requires an examination of the underlying substantive information transmitted to the social media user and consideration of any other facts and circumstances, such as whether the interactive communication is merely a response to a request or inquiry from the social media user or is forwarding previously-filed content,” it notes.
For example, it says that an incidental mention of a fund family, a link to a prospectus, or a response to a question not related to the investment merits of a fund, do not have to be filed. Whereas, a discussion of specific fund performance, or the merits of a particular fund, would have to be filed.
“Today’s inaugural guidance update on social media is intended to help firms strengthen their compliance efforts by providing meaningful real life examples in a format that is accessible to all on the SEC’s website,” said Norm Champ, director of the SEC’s division of investment management. “We expect future guidance updates will highlight other relevant issues for funds, advisers, and the public.”