On December 21, 2018, the Securities and Exchange Commission (SEC) filed and settled charges against two robo-advisers (i.e., advisers that provide automated, software-based portfolio management services) for making false disclosures and publishing misleading advertising materials on their websites and social media pages.  The two advisers agreed to cease and desist from further violations of the securities laws and to pay fines of $250,000 and $80,000, respectively.

Leaving aside the details of their alleged misstatements, what many observers will find most instructive are, first, that the twin settlements – announced on the same day – suggest a coordinated review of robo-adviser businesses and, second, the SEC’s focus in both settlements on social media practices.  Among the SEC’s social media-related findings:

The agency objected to a company retweeting positive posts made by its own employees, investors, and certain parties to whom the company would offer benefits for securing referrals through the posts. The agency viewed a number of these as prohibited testimonials and others as misleading because they failed to disclose financial interests of the authors in posting about the company.

The agency found violations of the investment adviser “solicitors rule” in a company’s practice of paying bloggers for new accounts opened as a result of hyperlinks to the company placed in or near blog posts about the company and its competitors.

More broadly, the agency found that internal company compliance programs had not kept up with – and did not provide for sufficient prior and ongoing review of the advertising and sales practices embedded in – the companies’ social media activity.