Ensuring compliance with regulatory guidelines is an important task for registered investment advisors (RIAs), broker-dealers and other financial professionals. The Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) set the standards for compliance, including rules for financial advisor email archiving. And understanding your obligations is critical for avoiding compliance infractions.
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Benefits of Email Archiving
Archiving email communications is a serious task for advisors from a compliance perspective. Failure to meet recordkeeping standards can result in fines or the censuring of your firm. Severe compliance violations could even lead to criminal action or the revocation of your registration.
Your brand reputation may also suffer, which can have significant financial consequences. And if you’re unable to attract new prospects or you’re losing clients to other advisors, you may experience a steep decline in revenue.
Proper archiving can help you avoid those types of situations. It also has the benefit of helping you stay organized. If you’re planning a meeting with a client, for instance, referring to archived email conversations can help you determine which talking points to cover.
Archiving also matters from a cyber security and privacy perspective. Utilizing an email archiving software or tech solution could offer additional layers of security and protection against hackers or cyber criminals.
Financial Advisor Email Archiving Regulations
Several rules and regulations govern the acceptable practices for advisor email archiving and recordkeeping in general. Here are the most important guidelines you’ll want to be aware of.
SEC Rule 204-2 (Investment Advisers Act of 1940)
SEC Rule 204-2 specifies the books and records that registered investment advisors, hedge funds and private equity firms must maintain, and how long they must maintain them. The rule covers a variety of records, including client communications.
Email, both on-channel and off-channel, falls into this category. Messages that are sent for business purposes through an approved method are called “on-channel.” They can easily be supervised, recorded and archived.
“Off-channel” emails do not meet these standards. For example, an encrypted email is an example of an off-channel communication. Advisory firms must take steps to archive both on- and off-channel messaging to satisfy Rule 204-2.
So, how long are advisors required to retain email archiving records? Per Rule 204-2, records must be kept for no less than five years. And the most recent two years’ worth of archiving records must be readily accessible at all times.
SEC Rule 17a-4 (Exchange Act)
SEC Rule 17a-4 outlines recordkeeping requirements for registered broker-dealers. Advisors who are subject to this rule must preserve electronic records of email communications in a non-rewritable and non-erasable format, referred to as WORM. The acronym is short for “write once, read many.”
Broker-dealers can use an audit-trail alternative for archiving. This requires them to use an electronic recordkeeping system that preserves records in a way that would allow the original record to be modified or recreated if necessary.
The period for maintaining email records is six years. The first two years’ worth of records must be stored in an easily accessible location. Broker-dealers must retain original messages as well as any copies of email communications, if they exist.
FINRA Rule 4511
FINRA Rule 4511 is a general recordkeeping rule that applies to member firms, meaning brokers and dealers registered with FINRA. This rule extends recordkeeping requirements to all business communications, including emails that are sent and received internally or externally.
Under this rule, member firms must preserve records in compliance with SEC Rule 17a-4 using the WORM format. Records must be kept for a minimum of six years.
Email Archiving Tips for Financial Advisors
Instituting some best practices can prevent archiving from becoming a thorn in your side. Here are some tips for maintaining compliance when managing email communications:
- Develop written policies and procedures for email archiving and recordkeeping, and ensure that all employees are familiar with them.
- Consider using a compliant email archiving software solution that integrates with the rest of your tech stack.
- Ensure that any email data you archive is regularly backed up and that backups are stored securely.
- Limit who has access to your email archives and monitor how often archived data is accessed and by whom.
- Secure archiving software with a unique password and enable multi-factor authentication.
- Routinely review your archiving policies and software to ensure that both are up-to-date and identify any potential weak spots that need to be addressed.
It’s also important for your chief compliance officer (CCO) to monitor SEC and FINRA regulatory updates so that if any changes to your archiving policies are required, they can be implemented promptly.
Frequently Asked Questions (FAQs)
What Is Email Archiving for Compliance?
Email archiving refers to policies and procedures for storing electronic communications outside of your email system. Financial advisors are subject to email archiving regulatory guidelines for SEC and FINRA compliance. Failing to meet email archiving compliance rules could subject your firm to fines, censure and other penalties.
What’s the Best Email Archiving Solution for Financial Advisors?
The best email archiving software for your firm is the one that delivers the features and functionality you need, is fully compliant with regulatory guidelines, and aligns with your budget. As you compare email archiving solutions, consider what it’s designed to do (and where it may fall short), what you’ll pay to use it, and how well it may integrate with other components of your tech stack.
Who Is Subject to Email Archiving Regulations?
The SEC implements email archiving regulations for registered investment advisors and registered broker-dealers. FINRA applies archiving rules to member firms. If you’re a financial advisor, it’s important to understand which archiving rules apply to your business and how to ensure you’re meeting the requirements.
Bottom Line
Email archiving is an essential task for financial advisors who wish to remain compliant with regulatory rules. If you don’t have an archiving policy in place, then it’s time to consider creating one. And if you do, it’s helpful to review it to ensure that you’re up to date on the latest regulations.
Tips for Growing Your Advisory Business
- Email is a powerful marketing tool, but crafting the right content and sending out messages can be time-consuming. Utilizing automation tools can help you stay connected with prospects without being tied to your computer or phone. SmartAsset AMP helps growth-focused advisors connect with leads and gives them access to automated tools to nurture relationships via email and messaging. Schedule a demo to learn how you can leverage it to build out your book of business.
- Email archiving is just one of many compliance issues advisors must tackle. Marketing, for example, is another hot spot for potential violations. Reading up on the SEC’s marketing rule as well as FINRA marketing guidelines can ensure that you’re promoting your business in a compliant manner.
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