• by Ray Schultz , Columnist, April 12, 2023

Some email marketers will probably not have to worry about this. But many in the financial sector will: The Securities and Exchange Commission (SEC) is taking action against Wall Street firms that use “off-channel” communications. 

These are informal communications that can take place over social media, text messages, WhatsApp and other channels, according to an article by the law firm of Faegre Drinker in JD Supra.  

In other words, you can’t have advisors sending personal messages by email or any other means on unsecured devices to offer securities. 

Specifically, the SEC has charged that registered firms “failed to adopt and implement written policies and procedures reasonably designed to ensure record-keeping requirements were met,” Faegre Drinker writes. 

What would the SEC would like to know?

For one, it asks for “the steps taken by the adviser to monitor, review and retain electronic communications related to the adviser’s business.

Electronic communications include -- but are not limited to -- email, text messages, messaging apps, instant messages, Bloomberg messaging and private messaging on social media sites.” 

Moreover, the SEC wants to know whether supervised persons are permitted to use “any form of electronic communication other than adviser email accounts for business purposes.”

What kinds of messages can get you in trouble? Faegre Drinker urges compliance officers to prohibit (we quote):

• Recommendations made and advice given (or proposed to be made or given)
• Receipt, disbursement or delivery of funds or securities
• Placing or execution of orders to purchase or sell securities
• Predecessor performance

What else can you do to remain compliant? The firm recommends:

1. Periodic Training and Policy Reinforcement
2. Annual Attestation of Compliance (Faegre Drinker offers a sample certification).
3. Ongoing Monitoring: This means a compliance officer should conduct “keyword or key-term searches within emails and other “on-channel” communications for an indication that supervised person may be using “off-channel” communications.”

But make sure you don’t go overboard. Refrain from taking personal data from your staff’s devices -- or you could face consequences under GDPR. 

The full article can be found here.