SEC Fiddles While The Financial Industry Burns?

COMPLY: Flattery on Facebook can mean headaches for advisers ... Financial advisers don't have the freedom to embrace social media with the same unbridled enthusiasm as the rest of the world. Even the most innocent comments posted to their social media profiles by friends and family could lead to trouble with regulators. Kind words from third parties may be construed as testimonials, which are heavily restricted for brokerages and not even permitted for registered investment advisers. – Reuters

Dominant Social Theme: The SEC is in tip-top shape and ready to rumble.

Free-Market Analysis: Why shouldn't US brokers be able to post encomiums on the Internet? From the point of view of those who run the US Securities and Exchange Commission, brokers that place praise or − heaven help them − self-praise on "social networking" sites are placing the consumer at grave risk.

The idea, according to regulators, is that unscrupulous brokers can fool investors into thinking they are honest and then abscond with fundsor otherwise perform nefarious and dishonest activities. Sound reasonable?

No. It is part of a larger misapprehension, in our view. It is all based on what may be considered a purposeful misunderstanding about how free markets work. The idea in the modern age is that one needs a huge governmental force of police to ensure that consumers are not taken advantage of.

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