Archiving communications is a crucial part of healthy compliance for any advisory firm…and is mandated by Securities and Exchange Commission (SEC) Rule 204-2:
- “All RIA firms must maintain and preserve their required books and records for no less than five years from the end of the fiscal year during which the last entry was made on a relevant record in order to be inspected.
- Those records have to be easily accessible.
- For the first two years in an appropriate office of the investment adviser, from the end of the fiscal year during which the investment adviser last published or otherwise disseminated, directly or indirectly, the notice, circular, advertisement, newspaper article, investment letter, bulletin or other communication.”
It’s what the regulatory body uses to ensure your firm is operating within legal boundaries. It’s the paper trail that documents every client-advisor interaction from start to finish.
It can also be an exhausting process – and it’s not going away any time soon.
In fact, the SEC is cracking down on communication archiving. In July 2022, the industry regulator fined Morgan Stanley roughly $200 million for failure to properly archive communications. Other large-scale firms quickly followed suit, with nearly $2 billion in related fines issued in 2022.
But your firm doesn’t have to join those statistics. Rather, you can tackle communication archiving head-on and implement a system to prevent compliance errors (and accompanying fines). To help you get started, we’ve outlined the basics of RIA archival below, including the four key areas you’ll need to address in archiving in order to effectively comply with SEC Rule 204-2.
Four key areas every RIA needs to archive to comply with SEC Rule 204-2
1. Website archiving
The first rule of compliance: archive, archive, archive – and that includes your website.
Websites are the ever-changing digital home for your firm. You likely post blog and company updates, show off your industry awards and add new pages as your firm grows. And since they’re a dynamic piece of your firm’s operations, that means you need to archive websites just as you would any other piece of communication.
Adhering to these rules can help your firm avoid costly compliance fines, while also protecting your firm. What happens if a client alleges you phrased something incorrectly in a blog five years ago? With proper website archival in place, you can look up exactly what was published.
Click here to download our free Top Archiving Tips Checklist
That same archival system also gives your firm insight into your website trends, allowing you to look up content you’ve posted in previous years as you plan new content for the future.
2. Email archiving
Did you know that there are over 347.3 billion emails sent each day? That would make for a crowded inbox.
Emails are an important part of running your RIA – you likely send internal emails to your staff, emails to your clients with updates on their accounts, emails to third-party vendors – the list goes on.
And every single one of those emails needs to be properly archived. To archive email is to capture, store and properly maintain records of your email communications and associated attachments on a long-term basis. It ensures that you have accurate records in case of an audit, or even for your firm’s internal reference.
Email archiving also helps increase security. Instead of clicking “delete” on those old emails and hoping a backup stays in the cloud, you can have them automatically sent to your archival software. This keeps employee inboxes clear, ensures greater security from would-be hackers and provides a backup should you lose access to an email account.
Related: Compliance from the Employee Perspective
3. Social media archiving
Social media use for prospecting and communicating with clients has been on the rise for years – and will only continue to grow as client bases skew younger via the Great Wealth Transfer. As such, social media archival is a must for firms.
The SEC’s Rule 204-2 states that RIAs should archive all customer queries, advertisements and posts associated with their firm. That’s right – you’ve got to archive Facebook. And archive LinkedIn. And archive Twitter – and so on and so forth.
Social media archival can be more difficult than website or email archival in that social media use is often spread across several platforms (e.g., Twitter, LinkedIn, Facebook, Instagram, etc.). Rather than manually archiving all social media posts and interactions, firms would benefit from investing in archival software that automates the process – thus saving time and improving productivity.
Related: Tips & Tricks for Chief Compliance Officers: Manage Social Media Risk
4. Text messaging archiving
In addition to social media, text messaging as a form of client communication is also gaining popularity. It’s also one of the more difficult methods of communication to monitor, as employees each have a personal phone they may or may not be using to text clients (which pose compliance risks).
It’s not enough to simply tell your employees “no texting about business” – you either need to create a written policy banning it and implement ongoing training accordingly, or embrace a software system that can appropriately archive texts.
And while banning text messaging communications may seem like the easier route, it could have the opposite result. Your firm will need to continuously train and monitor employees about the risks of cell phone use, and even that isn’t a 100% foolproof method. There’s really no way to know for certain whether an adviser is or isn’t texting a client.
Plus, banning texts could negatively impact your client relations, especially since 90% of clients prefer text messages over phone calls!
The other option is to invest in a software archival system that automatically archives text messages on employee devices. This solution is easy to implement and ensures any client text messages are properly archived in accordance with SEC standards.
RIA in a Box has a new compliance texting service available that can easily and automatically store client-adviser texts for your firm, keeping you compliant even as you communicate on the go.
And don’t forget: Other messaging apps
There’s one more “bonus” area your firm will need to archive: third-party messaging apps.
Apps like WhatsApp, Facebook Messenger, Slack and Kik are just a few of the third-party programs advisers may be using to communicate business information. Such apps are under increasing scrutiny from the SEC and fall under the same umbrella of Rule 204-2’s archival requirements.
That doesn’t mean you can’t use other messaging apps, it just means they need to be archive-friendly.
Once you’ve established an archival system for your emails, texts, social media accounts and website, you’re on your way to better compliance and increased client satisfaction.
Automate archiving with RIA in a Box
Our communications archival and review software can keep reliable records across all channels. Click here to learn more or book a demo today.