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SUMMARY OF A REGISTERED INVESTMENT ADVISOR'S
RETENTION REQUIREMENTS by Daniel A. Bernstein, JD, AIFA A central provision in the compliance of any investment advisor is their books and recordkeeping policies and procedures. Rule 204-2 of the Investment Advisers Act of 1940 and the comparable rule in the majority of state securities acts requires investment advisors to make and keep true, accurate and current books and records relating to their investment advisory business. Typically these documents must be kept for at least five years from the end of the fiscal year during which the last entry was made on such record. Investment advisor rules are generally silent on whether e-mail communications are of the type of medium which triggers recordkeeping rules. In addition, there have been no formal interpretative releases, no-action letters, or any other official comments from the Securities and Exchange Commission on e-mail retention. There has, however, been a concerted effort by examiners to interpret e-mails as written communications which must be maintained. In addition to maintaining e-mails, the Investment Advisers Act of 1940 requires all SEC registered investment advisors to have policies in place to ensure the accurate creation of required records and their maintenance in a manner that secures them from unauthorized alteration or use and protects them from untimely destruction. State registered investment advisers may have a similar policy requirement, but even without a policy requirement all states mandate books and records to be kept. Because many of the recent securities scandals were discovered through incriminating e-mails, recent SEC examinations have focused on reviewing investment advisor e-mails. The request can come in many forms such as: (i) show all of the correspondence with a particular client, including e-mails, (ii) show all e-mails for a particular period of time, and (iii) show all of a particular employee’s e-mails. Investment advisors may also be subject to other rules and regulations and must be cognizant of additional e-mail maintenance requirements such as: (i) SEC, FINRA, and/or New York Stock Exchange broker-dealer rules, (ii) Commodity Futures Trading Commission and National Futures Association rules, (iii) Sarbanes-Oxley Act; (iv) Gramm-Leach-Bliley Act, and (iv) Health Information Portability and Accountability Act (HIPAA). Daniel Bernstein is the Director of Professional Services for MarketCounsel, one of the country’s preeminent business, regulatory, and compliance consulting firms for registered investment advisors. |