SEC Wants To Follow You On Twitter, Facebook, LinkedIn, YouTube...

File this one under: "There Are Better Things The SEC Can Be Doing."

Financial advisors' online activity on social media websites is being scrutinized by the SEC, according to a compliance consulting firm and a report in Investment News.

The SEC sent a document request list to investment advisers as part of an apparent sweep exam focused on social media and networking, ACA Compliance Group reports. (See the request list at the  bottom of this post.)

Pardon me for being cynical but I worry that the SEC might be spending too much time analyzing this crazy new thing called social media. (How does one agency go from charging hedge fund employees for insider trading to tracking what blogs John Doe RIA is following?)

Before you jump on me about how the SEC is just trying to protect investors from predatory Tweets and Facebook friend requests,  consider that just35% of financial advisors use social media professionally. That's according to a December report from the Aite Group.

That's not to say within those 35% of advisors something illicit isn't happening. But instead of asking financial advisors for every detail of their social media activity can't the SEC make this a lot simpler?

Here's one solution (feel free tell me this is too simplisitc and that we need the SEC to make everyone's lives safer and more complicated): Treat your professional social media profiles like any other advertisement or promotional material. Your print marketing shouldn't be held to a greater standard than your social media marketing.

Some outlets in the industry have already addressed the regulatory restraints about social media. LinkedFA is a social networking site strictly for financial advisors, insurance professional and investors. Since advisors are required to store electronic communications with clients, LinkedFA has made the interaction easier by automatically storing communication for six years. Read more about LinkedFA here.

(Read 7 Things Advisors Need To Know About Social Media)

If the SEC is trying to understand how advisors are using social media, that's great. But if it's trying to come up with rules and regulations that restrict advisors' interaction with the world, that's a problem- especially for an industry that is struggling to employ a new generation of financial advisors.

This morning, BNY Mellon's Pershing unit released a study showing the number of investment professionals has remained largely unchanged at about 310,000 over the last few years. And there is no clear source of new talent entering the space.

The percentage of investment professionals over 55 increased from 32% to 36% between 2007 and 2009.The brokerage force is aging.

The financial services industry needs more young, talented professionals that understand the importance of communicating online.  It doesn't need rules that hinder its access to thousands of potential clients and resources.

Here's a list of items the SEC is requesting from certain investment advisors as part of its social media sweep:

1. Involvement in Social Media - Documentation is requested in order to identify an adviser's level of involvement with or usage of social media websites. The requests have been seen to focus on social media websites such as Facebook, Twitter (and AdvisorTweets.com), LinkedIn, LinkedFa, YouTube, Flickr, MySpace, Digg, Redditt, as well as any blogs used by, or subscribed to, by the adviser.
2. Communications - Documentation is requested for the communications made by, or received by an adviser on any social media website. These communications can include, among others, blog postings, messages, and/or tweets.
3. Adviser's Use of Social Media - The adviser's policies and procedures relating to the use of social media websites are requested. Specifically, the requests include policies and procedures concerning communications and prospective communications posted on any social media website and policies and procedures regarding any ongoing monitoring or review processes related to social media communications.
4. Third Party's Use of Social Media - Documentation is requested for any third-party use of social media that is maintained by the adviser. These requests address policies and procedures relating to communications posted by third parties on behalf of the adviser, as well as policies and procedures relating to the adviser's monitoring and review processes of these communications.
5. Adviser's Non-Business Use of Social Media - The adviser's policies and procedures relating to the use of social media by employees for non-business purposes are requested.
6. Social Media Training - Documentation is requested relating to an adviser's internal training and education programs for employees' use (both personal and business-related) of social media websites.
7. Disciplinary Actions Related to Social Media - Documentation is requested regarding any disciplinary action taken against an employee based on their use of social media websites.
8. Record Retention - The adviser's record retention policies and procedures concerning its involvement with or usage of social media are requested. The requests cover the record retention policies of the adviser, the adviser's employees, and any third-party utilized by the adviser to manage its use of social media websites.

(source: ACA Compliance Group)