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Client Alert: SEC Investigating Investment Adviser Compliance with Recordkeeping Rules

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Recently, reports emerged that several investment advisers received requests from the U.S. Securities and Exchange Commission (“SEC”) for information regarding their policies and procedures related to so-called “off-channel” communications. The requests represent the latest probe by the SEC into how financial institutions preserve electronic communications received and sent by employees on personal devices and via third-party messaging services (e.g., WhatsApp, Telegram, iMessage), and signal that the SEC is expanding its focus to include investment advisers.

Less than a month ago, on September 27, 2022, the SEC announced that a compliance sweep of broker-dealers’ electronic communications resulted in 11 administrative actions against 15 broker-dealers and one related investment adviser. The SEC charged the financial institutions with failing to maintain and preserve electronic communications sent and received by employees through unauthorized methods of communication and on personal devices in violation of the federal securities laws. In total, the financial institutions paid more than $1.1 billion in fines.   

As night follows day, it is not surprising that the SEC has now broadened its focus to include registered investment advisers.  On October 11, 2022, news outlets began reporting that multiple investment funds and advisers received requests from the SEC seeking information regarding their policies and procedures related to “off-channel” communications. Investment advisers and the funds they manage should anticipate increased scrutiny of policies and procedures related to electronic communications in the coming months, and review their policies and procedures accordingly.

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If you have any questions about the issues addressed in this Client Alert, or if you would like a copy of any of the materials we reference, please do not hesitate to contact us:

Michael Liftik - Co-Chair SEC Enforcement Practice
Phone: + 1 202-538-8141

Sarah Heaton Concannon - Co-Chair SEC Enforcement Practice​​​​​Email:
Phone: + 1 202-538-8122

Stacylyn Doore​​​​​
Phone: + 1 617-712-7121

Kurt Wolfe​​​​​
Phone: + 1 202-538-8379

Jessica Reese​​​​​
Phone: +1 617-712-7130