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SEC charges investment advisor with conning clients over LinkedIn

A man who used social media websites to sell allegedly fraudulent investment items is facing federal charges, the Securities and Exchange Commission recently announced. The SEC investigation into the investment advisor’s activities shows how difficult it can be to monitor commercial transactions over social media.

According to the SEC, the man joined in online discussions on LinkedIn, a website for job seekers, to advertise so-called “bank guarantees” and “medium-term notes.” He allegedly claimed that his business had $500 billion in securities for sale to investors. The federal agency described bank guarantees and medium-term notes as fictitious investment items.

The man is accused of providing false and misleading information about his company’s assets, clients and operational history, both online and in filings with the SEC. He also failed to register as a broker-dealer in investment items, failed to keep proper records and books and his company did not have the necessary compliance policies and procedures, the government said.

Social media sites like LinkedIn, Twitter and Facebook have provided new opportunities for registered investment advisors to reach potential clients. But regulators say that it is difficult to keep track of those advisors who are dishonest and selling fraudulent products.

As the co-chief of the SEC Enforcement Division’s Asset Management Unit said, deceitful investment advisors often adapt their schemes to take advantage of new technologies such as social media. Charges like the ones leveled against the defendant in this case shows that the SEC is moving to “pursue fraudulent activity on new and evolving platforms” such as LinkedIn, the agency official said.

Source: Wall Street Journal, “SEC Charges Adviser in Social-Media Scam,” Caitlin Nish, Jan. 4, 2012

John P. Aldrich
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