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FTC Compliance – What You Didn’t Know About Online Endorsements


FTC 101

The Federal Trade Commission aims to prevent business practices that are anticompetitive, deceptive or unfair to consumers and its regulations affect businesses trading in every industry. One of its most sweeping regulations is Section 5 of the Federal Trade Act, which addresses appropriate commercial speech to help put an end to deceptive advertising. The FTC has evolved its rules under the act to apply to the ever-evolving world of online advertising. What many companies, review sites, bloggers, and celebrities don’t realize is that if they share content with commercial messages that convey personal enjoyment of a product/service with followers and get compensated for it, their actions are considered endorsements. These endorsements require clear disclosures of the relationship with the product/service provider.To provide guidance on complying with these rules, The FTC released the Guides Concerning the Use of Endorsements and Testimonials in Advertising to serve as a framework for complying with the relevant FTC regulations. Here is an overview of some expectations:
  1. Endorsements apply to social media and new technology as it evolves. For Twitter, with a 140 character count limit, the use of hashtags #ad #paidad can be sufficient.
  2. Disclosures for videos are not sufficient in the video descriptions or only at the beginning of the video. Disclosures must be displayed throughout the video for all to see at any point they tune in.
  3. Social media contests that require entrants to tweet or share for a chance to win must incorporate disclosures as part of the contest share messaging and contest terms.
  4. Free products given to customers for online reviews (positive or negative) are considered endorsements. This should be mentioned on review pages.

Consequences of Non-Compliance

While these guides are not considered formal regulations, the FTC has warned that it will be leading investigations and taking immediate action for practices that fall outside of the guidelines in a way that violates the rules in the Federal Trade Act.Penalties for non-compliance can range from a written warning letter to a fine of $11,000 per incident. In other cases, these fines have been much higher; as in the case of Legacy Learning Systems, a popular provider of guitar-lesson DVDs, charged with $250,000 for advertising products through paid online affiliate marketers, and having them falsely pose as objective customers. Machinima also settled similar charges with the FTC for paying YouTube video creators up to $30,000 for their video reviews without disclosing so.

Using Social Media for Regulation FD Compliance

Full disclosure. You’ve probably heard that many times as a way to show that the speaker has a vested interest in what they are saying. When it comes to public companies, full disclosure is not a whim, but rather a fundamental requirement. It helps keep the modern stock markets fair (along with other regulations).


Regulation FD (Reg FD), passed in 2000, is an SEC reporting requirement that mandates that all publicly traded companies must disclose material information to all investors at the same time. The regulation was a response to the rapid expansion of online trading and the power of the open internet. On the online trading side, millions of users now had the ability to execute trades with a click of a button. On the communication side, there was a new ability to disseminate information. The internet created a need for more open disclosure and the ability to deliver it.

Previously, company information such as financial results and material changes was distributed to analysts via conference calls. Access to this information was restricted, and it created an environment where large players (who employed the analysts) had access to market-changing information before the public.

Now, under Reg FD, reporting companies need to deliver the information to all the public at the same time. Traditionally, press releases serve this function. But press releases can be slow to produce, cumbersome to manage and costly (especially to the ~ 14,000 small issuers that trade on the OTC). Every time an issuer needs to report information, they’d have to write, edit, approve and release news. And, press releases for financial disclosure are not cheap.

Old School Disclosure – Press Releases

Consider, one well-known press-release service charges $750 for one release. Each company needs to do at least three quarterly’s (10-Q) and one annual (10-K). Also, throughout the year any company worth their salt will be doing deals, adding resources, or whatever they can do to improve their business. If these are significant enough, these must also be reported.

As of April 2, 2013,  the SEC made a clarification that companies can now use social media to comply with Reg FD! This is a determination that social media is now widespread enough that is provides

“another method or combination of methods that is reasonably designed to effect broad, non-exclusionary distribution of the information to the public.”

For public companies, this is a game changer on how they comply with Reg FD. They don’t have to spend hours upon hours drafting a press release and spending thousands upon thousands for straightforward compliance. They can now use their social media accounts to quickly and cost-effectively distribute their material information in a fair and SEC sanctioned manner.

In October 2015, Goldman Sachs’ took the initiative and started using their website and Twitter to distribute official documents. While now, this might be an exception, it is inevitable that this method of distribution will become the standard. The savings in time, complexity and cost are too powerful to ignore and the internet will take over another industry.

Of course, there are specific rules and guidelines to follow. A company can’t just post a Tweet and think that’s it. Here are best practices to follow:

There are many social media channels out there. However, some obscure network with limited following can’t be considered broad, non-exclusionary distribution. Facebook has an algorithm that determines what shows up on a feed; not all posts will appear. Thus, the most appropriate social media network for Reg FD compliance is Twitter.

Proper Notification
Announce before any disclosure what channel you will be using. Put it on your website, your filings, your press releases, anywhere and everywhere you can so your investors and regulators know exactly where to watch. Be consistent, timely and regular on your Tweets so that it becomes the go-to source for such information.

Trusted Source
Who is creating the Tweet? Are they the party responsible for such disclosures? You want to ensure that the Tweet is accurate, from the proper channel and that it is authentic. Effective security and collaboration processes are vital.

Other SEC Regulations
Reg FD is, of course, only one of many SEC requirements. Posting on Twitter does not negate any of those. Consider forward-looking statements and the inclusion of meaningful risk factors. Are there other Tweets that might get entangled with the Reg FD Tweets? While Twitter might make the disclosure creation easier, it’s still a legal record and your legal team should sign off.

As with all sensitive business communications, a proper record is imperative. You don’t want to rely on Twitter in the case of an audit. They have no duty to save your Tweets. Don’t rely on techniques that can’t be verified or are susceptible to alteration. You need a provable, accurate record of EXACTLY what you disclosed and when.

SEC regulatory notices concerning web and social media sites explicitly state that firms must retain records of all business-related electronic communications to remain compliant. Failure to comply with these regulations can result in hefty fines, bad publicity, and ultimately loss of business. It’s critical your company implements a robust records retention policy for your websites and social media pages. You must preserve your online presence in a way that’s regulation-compliant, user-friendly, and, above all, affordable.


That’s where PageFreezer steps in. PageFreezer is a web and social media archiving service that is archiving over 600 public companies, financial firms, government agencies and other major organizations. We know exactly what regulators are looking for regarding accurate record keeping and ensure your archives are secure, authentic and easy to produce in case of an audit.

With a proven, trusted archiving system in place you’ll never be caught flat-footed, scrambling to deliver accurate records. You don’t want to spend hours and hours trying to produce records, or worse, sanctioned by the SEC.

PageFreezer offers an enterprise-class SaaS solution, built to support even the most sophisticated websites, blogs, and many social media networks. All accessible on one platform. With PageFreezer, you get complete archives of ALL your web content — without a lot of hassle.

Archiving for FINRA Social Media Compliance

Financial firms are naturally cautious when it comes to new communication technology. After all, they understand that regardless of the medium the general rule applies; they are accountable for all business communications. Plus, each new communication channel comes with its specific compliance issues that need to be figured out BEFORE any actual use.wall-street2However, social media isn’t new anymore. FINRA has created specific guidelines all the way back in 2010 (Regulatory Notice 10-06) and in 2011 (Regulatory Notice 11-39). That means, with a proper social media policy in place, financial firms just need to follow the guidelines and can Tweet and Post just like everyone else.Of course, a bit of discretion is involved. While a certain post coming from an individual might seem innocuous, coming from an investment advisor, can mean an entirely different thing. “SELL when you can” coming from a buddy referring to football fantasy, would mean something quite different coming from a broker.A good social media policy can take care of a lot of this. Separation of accounts, specific guidelines to who can say what, and specific approvals for different accounts can help ensure what goes out is vetted properly.Controlling what goes out is only half the battle. The other significant aspect is keeping accurate records of all business communications; who said what, when.
1. Recordkeeping The obligations of a firm to keep records of communications made through social media depend on whether the content of the communication constitutes a business communication.Rule 17a-4(b) under the Securities Exchange Act of 1934 (SEA) requires broker-dealers to preserve certain records for a period of not less than three years, the first two in an easily accessible place.Among these records, pursuant to SEA Rule 17a-4(b)(4), are “[o]riginals of all communications received and copies of all communications sent (and any approvals thereof) by the member, broker or dealer (including inter-office memoranda and communications) relating to its business as such, including all communications which are subject to rules of a self-regulatory organization of which the member, broker or dealer is a member regarding communications with the public.”The SEC has stated that the content of an electronic communication determines whether it must be preserved.

How to record social media communications

Even for a technically sophisticated user, social media record keeping seems onerous. Sending out a Tweet is one thing, now you’re supposed to record it? For three years?This sounds like a job for Superman social media archiving. Social media archiving is a technology solution that automatically monitors specified social media feeds and archives all the activity associated with that feed. It also provides authentication, so that the record can be verified.PageFreezer Software has been providing this service since 2010 to hundreds of financial firms. We know the rules, inside and out, and have the technology and systems for easy, simple, affordable FINRA social media compliance. Using the same dashboard, you can also archive all your website and blog content.Visit our Financial Services Compliance page to learn more.

Archiving for FCA Social Media Compliance

In March 2015, the FCA (the UK Financial watchdog, The Financial Conduct Authority) issued compliance guidance for how financial firms can use social media:

FG15/4: Social media and customer communications: The FCA’s supervisory approach to financial promotions in social media

The_City_London2It’s twenty pages long so, as with any government financial document, chock full of specific details. Obviously, if you’re in the industry, you (or probably your compliance officer) should absorb it all. Today though, we’re just going to focus on the archiving part; the requirement to keep accurate records of who said what, when.

Section 1.25 cuts to the heart of the matter:
Firms should also keep adequate records of any significant communications. As well as helping to protect consumers, these records enable the firm to deal effectively with any subsequent claims or complaints. Firms should not rely on digital media channels to maintain records, as they will not have control over this: social media in particular may refresh content from time to time, with the consequent deletion of older material.
In other words, use an archiving service. While you might see that as a self-serving statement, it’s none the less true. Social media archiving services have the processes, technology and knowledge to ensure you have these records in place (without the need to develop everything in house).

Financial Communications – Promotional or non-promotional?

In general, when using social media financial firms will have two types of communication; promotional and non-promotional. As the non-promotional communications do not involve a financial aspect it’s a non-regulated activity and do not require archiving.

However, anything that even has a hint of financial promotion probably falls under the regulations and thus needs archiving. Anything that “includes an invitation or inducement to engage in financial activity” is considered promotional. Be careful, a few words can turn an otherwise non-regulated communication into something that now falls under compliance.

Personal, or in the course of business?

Another factor is ‘in the course of business’. Are you communicating as a person, with your personal views? Or, are you communicating for business? Ensure there’s clarity, so that no one can mistake one for the other.

Just because it’s a “new” medium doesn’t mean that the old rules don’t apply. All the previous rules for factors such as misleading statements, clarity, and fairness are still in place. You need to consider the medium and the intended audience; disclaimers, emphasis and balance all need to be taken into account.

The guidelines go through many examples, showing what is compliant and what is non-compliant. By understanding these examples, and having proper internal policies and procedures in place, UK financial firms don’t have to be afraid of social media. Just make sure everything (including proper social media archiving) is in place BEFORE you start Tweeting and Posting!

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PageFreezer tops “Archival Acid Test”

Web archiving continues to be a critical issue as companies and organizations search for the most foolproof methods of preserving their online content. There are numerous tools and services out there, but how can you be sure which one can stand up to its claims? The primary concern is that an archived page with complex content can be very hard to capture and replay perfectly.

To investigate the strengths and weaknesses of various archiving tools, the Web Science and Digital Libraries Research Group at Old Dominion University developed an “Archival Acid Test”. The test evaluates features which modern browsers execute well, but preservation tools often have trouble handling (such as Javascript, CSS, and HTML5 content). The researchers tested five web archiving services –,, (no longer functional),, and WebCite – along with the archiving tools Heritrix, WARCreate, and GNU Wget. The findings were published by the University in a paper, which revealed that none of the tools tested were able to fully render a captured version of the elements that displayed perfectly in a live web browser (such as Chrome).

Since PageFreezer is industry-leading in its ability to capture and replay web content, we asked the group to put our service to the test. The results were telling – PageFreezer was the only tool to pass every requirement, even advanced features!

PageFreezer archiving acid test graphWhen you are using PageFreezer, you can be confident that you are working with the most advanced website archiving solution available. It makes PageFreezer a smart choice for regulatory compliance and other cases where accuracy and completeness are critical.