Sarah Tanaka


Section II will detail the creation of the SEC, including key that shaped the establishment, goals, and mission of the SEC. Furthermore, it will focus on who is an investment adviser under the Investment Advisers Act of 1940, the controlling legislation on the matter. Section II will also examine the SEC‟s current guidance on investment advisers‟ use of social media and the public policy behind the new provisions. With social media revolutionizing the way individuals communicate and share information, Section III will discuss the advantages and disadvantages of the current guidance regarding investment advisers‟ use of social media. It will explore how investors are using social media to gather and research information about the financial industry, and it will consider how social media‟s popularity has changed investors‟ expectations of social media usage. Section III will also explain the wide spectrum of social media use by investment advisers. Finally, this comment will discuss how in order for the SEC to continue to protect investors, it can no longer ignore the impact of social media. It will propose the modernization of the SEC‟s regulatory framework controlling investment advisers, specifically addressing the Testimonial Rule. The antiquated Testimonial Rule reflects investment advisers‟ use of print and static media to communicate with prospective and current clients, whereas the proposed rule would permit investment advisers, who advertise public commentary from third party social media sites to respond to comments and reviews. In order to resonate with the current interactive climate of social media, the proposed changes to the Testimonial Rule would balance the investment advisers‟ desire to utilize social media but also preserve the SEC‟s mission to protect investors.