Susan I. Gault-Brown and Kelley A. Howes
In December 2018, the Securities and Exchange Commission’s Office of Compliance Inspections and Examinations (OCIE) published its fifth and last risk alert of 2018 on the topic of electronic messaging by personnel of registered investment advisers. In the alert, OCIE focuses its attention on the growing use by advisory personnel of various types of electronic messaging for business-related communications and seeks to provide suggestions to advisory firms on ways firms can continue to meet their regulatory requirements, notwithstanding this new challenge.
According to OCIE, the risk alert was occasioned by the increasing use of social media, texting, and other types of electronic messaging apps by investment advisers and their representatives. OCIE cautioned that advisers should be aware of the regulatory implications of the pervasive use of mobile and personally owned devices for business purposes. According to OCIE, the use of electronic messaging by advisory personnel implicates the following regulations under the Investment Advisers Act of 1940 (“Advisers Act”):
The risk alert provides a list of best practices that OCIE observed and identified during its examinations of registered investment advisers that it believes may assist other advisers in meeting their obligations under the Books and Records Rule and the Compliance Rule. The practices include the following:
Policies and Procedures
Employee Training and Attestations
Control Over Devices
Despite the inherent difficulty in policing the use of texting and other types of electronic messaging by advisory personnel, their pervasive use means that advisory firms cannot ignore the likelihood that these apps will be used for business purposes. Advisers should therefore carefully review their current policies and procedures in light of the best practices identified by OCIE to determine if any updates should be considered.
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