By Lauri B. London
The Securities Exchange Commission expects advisers to be vigilant in keeping up with the constantly evolving forms of electronic communications used by their employees.
After examining current practices on the various forms of electronic messaging used by registered investment advisers and their personnel, the Office of Compliance Inspections and Examinations (“OCIE”) issued a recent Risk Alert, addressing electronic messaging by Investment Advisers using personal devices such as mobile phones, tablets and personal laptops.
The Risk Alert relates to electronic communications (other than firm e-mail, for which there are now decades of compliance practices), and provides an important reminder of the compliance obligations and challenges posed by communications by e-mail, text messaging, instant message, or social media, which all may be regulated communications for the purposes of the Books and Records Rule under the Advisers Act.
Investment Advisers are required by the Compliance Rule to keep policies and procedures that monitor communications for compliance with the Advisers Act, and maintain records of such communications, regardless of the device used. The Risk Alert includes a summary of OCIE’s survey and offers examples of practices that advisers can use to comply with the Advisers Act with respect to electronic communications, including those using personal devices, other than firm e-mails.
Some of the highlighted best practices:
Limit the use of electronic communications if you can’t confirm compliance with the books and records requirements.
Prohibit use of apps that allow anonymous messaging or automatic destruction of messages;
Require incoming messages from prohibited apps to be moved to another trackable electronic system that can comply with the adviser’s policies.
· Adopt policies for use of – and appropriate monitoring for- personally-owned mobile devices, addressing use of social media, personal email and websites, texts and instant messages
All advisers, in conducting their compliance reviews, should continuously examine the how their people communicate with potential and current clients and update their policies and procedures as appropriate.
December 17, 2018