(Reuters) - Securities regulators charged an Illinois-based investment adviser on Wednesday with using LinkedIn and other social media networking websites to lure investors by offering more than $500 billion in fake securities.
The Securities and Exchange Commission alleged that Anthony Fields, 54, of Lyons, Illinois, made the fraudulent offers to sell securities through two sole proprietorships -- Anthony Fields & Associates (AFA) and Platinum Securities Brokers.
The agency said Fields provided false and misleading information about clients, assets under management and even the history of his firm's business.
The SEC said Fields, for example, lied on forms he filed with the commission by claiming to have $400 million in assets under management -- when he fact he had none.
The SEC also alleged that he violated numerous other securities regulations by failing to maintain adequate books and records or carry out proper compliance procedures. Fields held himself out as a broker-dealer even though he never properly registered with the SEC, the agency said.
Fields, who is representing himself in the case, could not immediately be reached for a comment.
The SEC's enforcement action against Fields comes as it has increased scrutiny of the use of social media in the financial services industry.
Last year, the SEC launched a broad review of outdated securities regulations that have not kept pace with the evolution of social media sites such as LinkedIn and Facebook.
As part of the review, the SEC is looking at whether to loosen regulations that ban general solicitations for private securities offerings.
Congress is also considering legislation to ease rules that restrict private companies' capital raising efforts, but both Congress and the SEC are trying to carefully craft any reforms to ensure they do not erode investor protections.
On Friday, the SEC's Advisory Committee on Small and Emerging Companies will discuss whether to recommend relaxing current restrictions on general solicitations for securities offerings.
The SEC on Wednesday used the enforcement case against Fields as an opportunity to make an example of the issue by warning investors about the dangers of online scams.
It also urged investment advisers to be more cautious about their use of social media to attract clients.
The agency issued two alerts on social media usage. One, targeting investment advisers, said SEC examiners have noticed that firms often have multiple overlapping procedures that apply to advertisements and client communications, and those procedures may not always specifically apply to social media.
Such lack of specificity may cause confusion as to what procedures or standards apply to social media use, the SEC said in its alert. Many procedures were also not specific as to which types of social networking activity are permitted or prohibited by the firm and many did not address the use of social media by solicitors.
The second alert offered tips to help investors avoid fraudsters who use the Internet to attract business.
As investment advisers increasingly utilize social media to communicate with clients and potential clients, firms need to be mindful of the applicable standards governing those communications, said Carlo di Florio, the director of the SEC's Office of Compliance Inspections and Examinations.