The SEC’s Office of Investor Education and Advocacy has issued an “Investor Alert” warning “investors to be better aware of fraudulent investment schemes that may involve social media.”  The OIEA is concerned about social media fraud because it “offers a number of attributes that criminals may find attractive” including low cost distribution, ease of mass communication, anonymity, and the appearance of legitimacy.  The Investor Alert warns investors to be wary of unsolicited investment offers, promises of outsized returns, pressure sales tactics, and affinity group sales tactics.

OUR TAKE: This Investor Alert shows how the SEC views social media as a tool to commit fraud and avoid regulatory supervision rather than a new venue to educate potential clients.  Investment advisers using social media marketing must make sure its social media compliance policies and procedures can withstand this scrutiny.