By Juan O. Perla, J.D. Candidate ’12, UC Berkeley School of Law
The first of this month Goldman Sachs announced that it would be hiring a new “social media community manager.” This report comes on the heels of Morgan Stanley’s announcement in March that it was launching a new social media program designed to enable its nearly 17,800 financial advisers to use Twitter and LinkedIn to disseminate investment information and insights. The moves by these two giants are sure to trigger a race in Wall Street to conquer the social media landscape for financial and investment services.
But why has the financial services industry been so slow to join the social media frenzy? For one, it worries about the legal pitfalls of letting their legions of advisers loose into unchartered territory. And their unease is not totally unfounded. As posted previously on The Network, the Financial Regulatory Authority (FINRA) brought an action last year to suspend and fine a California-based broker $10,000 for promoting certain investments in “a series of ‘misrepresentative and unbalanced’ messages” to her 1,400 Twitter followers. And as recently as a few months ago, the Securities and Exchange Commission (SEC) charged an Illinois-based investment adviser with securities fraud for offering to sell “more than $500 billion in fictitious securities through various social media websites.” These regulatory actions precede a set of notable guidance letters from both the SEC and FINRA, briefly discussed in the prior post, but reviewed in more depth below.
