* SEC issues regulatory alert on social media
* Company policies often lack specifics about social media
* Current policies may confuse employees
Jan 4 (Reuters) - Trying use an investment adviser's long-standing compliance procedures in the emerging world of social media isn't all that different from shoving film into a digital camera: it doesn't fit.
A "risk alert" issued by the U.S. Securities and Exchange Commission on Wednesday confirms that point.
Agency staff suggested that investment advisers may need to develop policies and procedures that are more tailored to social networking. Applying a patchwork of existing procedures to social media use may not be enough to keep employees in line.
The alert accompanied an SEC announcement on Wednesday that the agency charged an Illinois-based investment adviser with using LinkedIn and other social media networking websites to lure investors by offering more than $500 billion in fake securities.
Social networking sites, such as sites such as Facebook and LinkedIn , are transforming how everyone communicates, but the securities industry has been slow to adapt.
"There has been this pervasive fear that regulators will come down upon them," said Scott Peterson, co-founder of Relay Station Social Media LLC, a Washington, D.C.-based consultancy.
Industry rules require advisers to archive all electronic communications for a three-year period. The rule applies to communications such as e-mail and now messages advisers send to clients through social networks.
Some investment advisers are now loosening up by allowing the use of social networking sites, the SEC's alert reveals. But many firms will need to adapt their compliance procedures to avoid trouble. Most investment advisers have other policies that can broadly apply to social media use, such as procedures for advertising and communicating with clients.
But a "lack of specificity may cause confusion as to what procedures or standards apply to social networking use," SEC staff wrote. Many procedures at firms they reviewed also did not specify the types of social networking activity permitted or prohibited by the firm.
The SEC alert should send a louder message to investment advisers who are still muddling through social media compliance issues: get serious.
Advisers should review their marketing procedures and tailor them appropriately to social media postings and communications, said Elizabeth Krentzman, a chief adviser at Deloitte & Touche LLP in Washington, D.C.
The medium is different than traditional marketing or print advertising because "you have more potential publicists," she said. Every employee with a personal Facebook profile, for example, may want to mention the firm's name. Some firms, as a result, are tailoring their policies to prohibit staff from disclosing the firm's names on personal blogs and social networks, she said.
Firms can still include specific social media compliance policies in their manuals under the more general category of "electronic communications," according to Amy Lynch, president of FrontLine Compliance LLC in Leesburg, Virginia.
Just make sure they're "clearly identified under their own header" and listed in the table of contents, so they can be easily found, she said in an e-mail.
Broader advertising and communications policies still have their place, Krentzman said. But social media "really is it's own kettle of fish. And it's new," she said.