Firms should have appropriately established controls for review, approval, and archiving of all firm related websites and related content. Firms must be able to readily produce all current and historical website content that promotes the firm or any of its covered persons. The firm should establish controls to ensure that all content is approved prior to use by a designated supervisor. Such supervisor is to have appropriate knowledge related to such content requirements. The guidelines below do not represent an exclusive list of considerations that a supervisor must make in determining whether such website complies with all applicable standards.
Content Standards For Website Reviews:
The guidelines below do not represent an exclusive list of considerations that a supervisor must make in determining whether such website complies with all applicable standards:
- All statements are to be based on principles of fair dealing and not omit material information, particularly risk disclosure;
- Not make exaggerated, unwarranted, promissory, or misleading claims. An essential test in this regard is the balanced treatment of risks and potential benefits. Communications should be consistent with the risks of fluctuating prices and the uncertainty of dividends, rates of return and yield inherent to investments.
- Give the investor a sound basis for evaluating the facts in regard to any particular security, type of security, industry or service. Different levels of explanation or detail may be necessary depending on the audience to which a communication is directed. A statement made in an unclear manner can cause a misunderstanding. A complex or overly technical explanation may be more confusing than too little information;
- Not contain predictions or projections of investment results;
- Identify the name of the firm.
Recordkeeping and Retention:
Public websites are considering advertising per regulation. The Firm must have appropriate controls to ensure all website content is appropriately archived, including format and appropriate media. The records must include: (i) a copy of the communication and the dates of first and (if applicable) last use of such communication; (ii) the name of any supervisor who approved the communication and the date that approval was given; and (iii) information concerning the source of any statistical table, chart, graph or other illustration used in the communication.
Heightened Review Considerations:
The guidelines below represent some additional factors that could cause for escalation and/or heightened website reviews:
- Links to third-party websites, including appropriate disclosures and content approval;
- Use of performance projections, investment analysis tools, comparative illustrations, hypothetical analysis, back tested performance, etc.;
- Marketing of complex products and alternative investments, including applicable risk disclosures;
- Publication of Research Reports;
- Reference to past recommendations;
- If the firm was making a market in the security being recommended, or if the firm or associated persons will sell to or buy from customers on a principal basis;
- If the firm or any associated person has a financial interest in any of the securities of the issuer whose securities are recommended, and the nature of the financial interest (including, without limitation, whether it consists of any option, right, warrant, future, long or short position);
- Use of Social Medial;
- If the firm was manager or co-manager of a public offering of any securities of the issuer whose securities are recommended within the past 12 months.
- Use of Testimonials;
- Websites used by covered persons, including other business activities that may require supervision;
- Unregistered Securities Offerings and applicable prohibitions regarding general solicitation; and
- Private Securities Transactions and any related communications.
MasterCompliance provides expert consulting, outsourcing, and implementation tools in planning and budgeting for your firm’s compliance responsibilities. For assistance with understanding your firms requirements for website reviews, please contact us.