SEC Update: Morgan, Lewis & Bockius LLP New York, NY

Advisers continue to grapple with how to apply the prohibition on the use of testimonials to social media. In an effort to respond to questions in this area, the SEC Staff recently published a Guidance Update focused primarily on how the testimonial rule applies to the dissemination of genuine third-party commentary that could be useful to consumers who use social media to conduct research and due diligence on service providers, including advisers and investment adviser representatives. The Guidance Update does not break new ground. However, it does build on prior interpretations to provide some clarity around the publication of third-party commentary, rankings and client lists through social media. The prohibition on the use of testimonials is designed to prevent misleading advertisements that emphasize comments and activities favorable to the investment adviser while ignoring unfavorable comments or implying that one client's experience was typical of the experience of all of the adviser's clients.