A New Jersey law recently became effective which limits an employer’s ability to require or request a current or prospective employee to provide or disclose any user name or password to a personal social media account. The law had bipartisan support.
Many states have enacted similar laws. The public has generally been supportive of protecting the privacy of employees and prospective employees. The key for investment advisers is the details regarding what communications are protected and any exclusions available for compliance purposes.
For an investment adviser to allow its employees to use social media, the firm must be able to supervise and retain business communications. Some states, such as Maryland, have recognized that certain employers have regulatory requirements that require them to attain access to social media accounts. Other states, however, have decided that the need for privacy protection outweighs the regulatory burden to employers such as investment advisers and broker-dealers. California, for example, specifically considered the issue and decided not to provide any exclusions for regulated entities.
New Jersey has joined the Maryland camp and provided investment advisers with the ability to use social media. The New Jersey law specifically says that nothing shall be “construed to prevent an employer from complying with the requirements of State or federal statutes, rules or regulations, case law or rules of self-regulatory organizations.” In addition, the law appears to give a more broad allowance by not preventing an employer from implementing and enforcing policies pertaining to services the employee uses for business purposes.
Like other social media laws, including California, employers are also allowed to conduct an investigation in certain circumstances where they have reason to believe that there is a legal or misconduct issue by an employee, including where an employee is transferring proprietary or confidential information. In addition, the law does not protect communications that the employee has made public.
These laws are not specific to investment advisers, so many firms do not know they exist. Even if you are not located in a state that has implemented one of these laws, the development is important. State legislators tend to look to other states’ laws when creating their own. Hopefully, laws like New Jersey’s will be followed by other states, allowing investment advisers to use social media in a compliant way.