(Dow Jones) Securities regulators haven't developed specific rules about the industry's use of social-networking sites, but that doesn't excuse advisors who don't have their own policies.

The Securities and Exchange Commission has been sending deficiency letters to registered investment advisors it examines who don't have policies in place for using social-networking sites, compliance professionals say. Its actions are part of a larger focus on social-networking matters by the agency, which has been conducting a sweep on the issue.

A document request list sent by the SEC to certain registered investment advisors asks for a broad range of data related to social-media use, according to a compliance alert posted on the Web site for ACA Compliance Group, a consultancy based in Silver Spring, Md. The SEC requested documentation to help it identify advisors' level of usage of Web sites such as Facebook, Twitter and LinkedIn. It also requested other details, such as record-retention policies, disciplinary actions involving social media, and communications made and received by advisors through the sites.

An SEC spokesman declined to comment on the sweep or deficiency letters.

Misuse of social-networking sites is an issue that is cropping up during SEC examinations and enforcement actions, an SEC official recently said. "There's no question that people are misusing it," said John Walsh, associate director and chief counsel of the SEC's office of compliance inspections and examinations. Problems include advisors who use false information in their LinkedIn profiles or overstate their experience, Walsh said Feb. 7 at a compliance conference in Washington.

He compared misuse of social-networking sites to the days when boiler-room brokers relied on a phone book to cold-call unsuspecting customers. "The question is getting out in front of it," he said.

Walsh made the comments on the same day that an official from the Financial Industry Regulatory Authority, Wall Street's self-policing organization, said it would reconvene its social-media task force in March and issue revised guidance on the subject later in 2011.

Regulators often conduct sweeps when they identify possible weaknesses in certain practices, says Barry Schwartz, a partner at ACA Compliance Group's office in Boca Raton, Fla. Concerns about record-keeping and control of advisors are likely driving the SEC's inquiries, he says. Discussions about certain securities in a public forum could violate rules that prohibit testimonials and soliciting clients, he says.

Heightened scrutiny by regulators means that adopting a policy for social-networking practices should be a no-brainer for securities firms that don't already have one.

"They need to do something," says Amy Lynch, founder and president of FrontLine Compliance LLC in Leesburg, Va. Regulators expect policies to be in place covering a wide range of business practices. Social networking is no different, she says.

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