I am an enthusiast of social networking sites and web 2.0. But I realize they have limitations and dangers. I have been very concerned about the Recommendations feature in LinkedIn. That feature allows any of your connections on LinkedIn to post a recommendation or endorsement about you that appears on your profile page.
At first, that seems great. Since the one view of LinkedIn is that it operates as an online resume, posting recommendations is a smart feature. But what if you are in a regulated industry? Many professions have limitation on what they can say in advertisements and what they can say about their services.
I took a look at how recommendations are regulated for investment advisers and for lawyers. Two areas that affect me the most.
If you a registered investment adviser, you are subject to Rule 206(4)-1:
a. It shall constitute a fraudulent, deceptive, or manipulative act, practice, or course of business within the meaning of section 206(4) of the Act for any investment adviser registered or required to be registered under section 203 of the Act, directly or indirectly, to publish, circulate, or distribute any advertisement:
(1) Which refers, directly or indirectly, to any testimonial of any kind concerning the investment adviser or concerning any advice, analysis, report or other service rendered by such investment adviser. . .
It looks like recommendations are prohibited in an “advertisement.” The definition of “advertisement” is broad:
b. For the purposes of this section the term advertisement shall include any notice, circular, letter or other written communication addressed to more than one person, or any notice or other announcement in any publication or by radio or television, which offers (1) any analysis, report, or publication concerning securities, or which is to be used in making any determination as to when to buy or sell any security, or which security to buy or sell, or (2) any graph, chart, formula, or other device to be used in making any determination as to when to buy or sell any security, or which security to buy or sell, or (3) any other investment advisory service with regard to securities.
Is your LinkedIn profile an “advertisement” under this rule? If you state that you offer investment advisory services on your LinkedIn profile, then I think it is an advertisement. So you should not have recommendations.
What about lawyers? The first problem is that every jurisdiction has a different set of rules about attorney advertising. You need to take a look at the rules in your jurisdiction.
First look to the ABA Model Rule 7.1:
A lawyer shall not make a false or misleading communication about the lawyer or the lawyer’s services. A communication is false or misleading if it contains a material misrepresentation of fact or law, or omits a fact necessary to make the statement considered as a whole not materially misleading.
Under this rule, you could have a recommendation as long as does not have a material misrepresentation and is not misleading. That gets you into gray areas very quickly.
This is just a model rule. Every state is different. For example, Arkansas[Rule 7.1 (d)], Florida [Rule 4-7.2(c)(1)(J)], Indiana [Rule 7.2(d)(3)], South Carolina [Rule 7.1(d)], and Wyoming [Rule 7.2(h)] all explicitly prohibit any kind of testimonial in attorney advertising. Nevada, Pennsylvania, California, Louisiana, Missouri, New York, Oregon, South Dakota, Texas, and Virginia have limitations on what can be said in a testimonial or a disclaimer that needs to be present.
What do I think? Keep recommendations off your LinkedIn profile.
See:
- Adviser Use of LinkedIn May Violate SEC Rules by Bill Winterberg of FPPad.com
- FINRA’s Guide to the Internet – previous post
- Information on Professionalism & Ethics in Lawyer Advertising published by the American Bar Association.
- Massachusetts Rules of Professional Conduct – Rule 7.1
Good post, Doug – and I think you are exactly right with your analysis. Recommendations on LinkedIn, however, is really just the tip of the iceberg. What about wall postings that “recommend” a service on a company’s facebook page? How about client and peer endorsements on Avvo.com? What about “ratings” on GoogleMaps.
The fact is, those of us who are regulated by bar associations and other organizations are going to have a very difficult time turning all of this free speech off. In fact, in many instances, our only option would be to not use the service.
This issue is front and center in our lawsuit against the Louisiana State Bar Association (Scott Wolfe Jr. v. Louisiana Attorney Disciplinary Board, et al., USDC ED 08-4994). You can keep up with this suit at http://www.protectspeech.com.
Of course, advertisements by attorneys will still be regulated online. The old rules just don’t fit any longer.
Scott –
It is clear that bar regulators are way behind in addressing web 2.0. The FINRA rules are similarly limiting, but they do specifically address some of the things you cannot do (and the few things that you can do).
You are right to point out that my concerns about recommendations are not limited to LinkedIn, but any site that allows someone to recommend you. Avvo, the attorney rating site is a problem as well.
As Josh points out below, all of these limitations may not be constitutional. Call me a coward, but I would not want to be the test case.
Doug,
Thanks for picking up my post and circulating it with the legal community. Compliance in a regulated industry is a matter not to be taken lightly. As I’m sure you know, ignorance is not a defense.
Bill –
Thanks for starting my thinking on this. It is clear that the regulators for the securities industry and the legal industry have not gotten up to speed on Web 2.0. To the extent they have, they clearly frown on the use of many web 2.0 tools.
It’s a great point, Doug. There are a lot of gray areas with all the ways one can communicate via social media.
From a purely legal perspective, all of these regulations need to be read very narrowly. Blanket restrictions on endorsements and testimonials that are otherwise not false or misleading are, without question, unconstitutional.
Unfortunately, from a practical perspective, the consequences of being found in violation by the regulator (or even questioned about a potential violation) can threaten one’s livelihood. The stakes are too high for most in the profession to challenge overly-broad advertising regulations, or regulator’s interpretations thereof.
Josh –
I see the potential mischief that they are trying to address. But I think they have taken the sledgehammer approach.
As you point out, I don’t think anyone wants to be the test case for the constitutionality of the limitations.
One side benefit of the “sledgehammer” approach is that some attorneys are willing to be test cases in states that have imposed hyper-restrictive ad rules (FL, NY, LA). The worst of those rules will most likely be toast within a few years. Regulators will continue to overreach, however. It’s a tough spot of attorneys just out to practice law, build their businesses and stay on the right side of the licensing authorities.
Formerly employed by a mandatory bar, I can tell you the problem is worse than you suggest. In addition to having one state impose odd or burdensome rules, you need to factor in the differing and many times conflicting rules between the states. I recall sitting on a panel in New England listening to a disciplinary counsel describe how complying with the rules in state X meant you were automatically in violation of the rules in state Y. More recently I sat through a legal marketing seminar on ethics. My thought when it was over is that you can only really say you are a lawyer. Anything beyond that could get you in trouble.
The results of this patch-work of contrasting and conflicting advertising rules is that information becomes limited and clients have a hard time learning about lawyers and legal services. A friend of mine once commented that you can learn more about the TV you want to buy than the lawyer you want to hire. This is not a good situation and not conducive to expanding and enabling access to justice.
My 2 cents. I’ll come down off the soap-box now.
Toby –
I am sure Josh from Avvo (see his comment above) can share his frustration with trying to expose disciplinary information for lawyers.
Personally I think the limitations only hurt the people who need the information the most. Corporate counsel and regular purchasers of information have the means and networks to find good lawyers to help them. The average Joe needs a lawyer at the most crucial times in his life: buying a house, getting divorced, getting arrested and leaving his estate to his kids. It is the average Joe who really needs help and would benefit the most from having good, honest information about lawyers readily available to him.
First let me note this is my personal opinion and not that of my employer. :-)
But you take very clear language “A lawyer shall not make a false or misleading communication about the lawyer or the lawyer’s services” and then say that quickly gets us into the gray area. But it seems pretty clear on its face to me!
Then you take the leap to say if someone else posts something about you in a rec, then you have violated the rule. To me it seems pretty simple. Can’t you just remove a rec? It seems that if a rec gets close to the gray area, you simply remove it and send a private e-mail to the person explaining why you did so and thanking them for the rec anyway.
I’ll take issue with Toby, too. Call me old-fashioned but I like the concept of federalsim and the 50 states serving as laboratories to see what is a good idea and what isn’t. The Ethics Rules are probably 90% uniform and the few differences are often not that great. (Stipulated that advertising seems to be the exception.) The Florida Supreme Court recently suggested to the Florida Bar that lawyers should password protect all but the front page of their Websites and require registration. Of course that would make most everything invisible to the search engines and create other problems. I’m glad that rule won’t be adopted in all 50 states without hearing from the impacted lawyers.
Jim –
There are benefits to having 50 state laboratories. On the other hand, where internet activity is not clearly limited to a particular state, it gets really hard to figure out which rules you need to comply with. This gets even harder when you have a law firm operating in multiple states. What can you do with your website, blog, twitter, and LinkedIn profile may vary from state to state.
The trouble with the “false or misleading” standard is one of perspective. I can envision lots of recommendations that could be found as false or misleading depending on your perspective. “Doug is the best compliance guy out there and will do a great job keeping your company out of trouble.” Sounds nice. But am I “the best”? Can I keep “your company out of trouble?” I fear that the standard is applied in hindsight.
There is also the issue of how long the recommendation is up before it gets you into trouble. In many of these sites, you have no pre-approval of recommendations. It may go up, some gets into trouble and gets you into trouble, before you have a chance to take it down.
Thanks for sharing your personal opinion (and not that of your employer or any affiliated entity)!
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