Many brokerage firms and advisors have been experiencing difficulty with clashes between social media endorsements and the Securities and Exchange Commission (SEC) Rule 206(4)-1. This rule deals with testimonials and previously did not provide enough guidance to clearly outline protocol for social media sites and other third party review sites. The SEC has come to the conclusion that an advisor is not violating the testimonial rule when a client posts a review on a review site as long as the commentary is complete and cannot be changed or altered. The SEC also decided that if a review site has an average score (i.e. four out of five stars) the advisor may cite that rating on their website or on other advertising media. The SEC will not hold an advisor accountable for any positive reviews as long as the third-party review site is completely independent from one another.
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