Page 42 - Investment Advisor February/March 2023

COMPLIANCE COACH

By Thomas D. Giachetti

5 Keys to a Smart Texting Policy

Does your firm have policies and procedures that can stand up to SEC scrutiny?

o you have employees who text of such communications), then a cor-
clients for business-related responding different acknowledgment
Dpurposes? You say no, but are reflecting the same should be used; and,
you sure? 5. If the firm, upon prior written
Securities and Exchange Commission approval, permits texting via the use of
regulators are inquiring about firms’ a firm-provided device (thereby permit-
corresponding policies and procedures ting ongoing firm monitoring of such
and penalizing them (via enforcement communications), then a corresponding
actions with fines) when they fail to acknowledgment should be used.
implement a policy or fail to enforce an Remember, as indicated above, poli-
existing policy. cies and procedures are only effective
This is a very important issue that if they are followed, including ongoing
must be recognized and addressed by reinforcement of the firm’s policies (per
the entire financial services industry, annual execution of a corresponding the meetings and corresponding agen-
and, once implemented, it should be acknowledgment by each employee) to das referenced above). Permitting ongo-
monitored and enforced thereafter on further address recent SEC scrutiny. ing monitoring is only effective if you
an ongoing basis. However, policies and procedures are can demonstrate that actual monitoring
How do you best address it? Beware: only effective if they are followed via has occurred in the same manner as the
There is no perfect solution! these actions: firm performs ongoing email monitor-
We have reviewed the recent SEC 1. Address the use of personal devic- ing. Maintain regular ongoing (recom-
enforcement matters regarding the use es with all employees and indepen- mended monthly) records of doing so,
of personal mobile devices. The appli- dent contractor reps periodically (no and that you have addressed any corre-
cable RIA firms were “charged with vio- less than during the annual compliance sponding content concerns.
lating certain recordkeeping provisions meeting/training); thus, a correspond-
of the Investment Advisers [Act] of 1940 ing written meeting agenda item and A CAVEAT
and with failing reasonably to supervise sign-in sheet should be executed by each Regardless of your policies and proce-
with a view to preventing and detecting employee, and retained by the firm; dures, don’t be surprised if a regulator
those violations.” 2. If the firm holds regular meetings asks you to prove a negative: “How do
The SEC further stated that “the firms of all staff, the use of personal devices you know that your employee is not tex-
also agreed to retain compliance consul- should be an ongoing agenda item (and ting?” or if he/she is using an app, “How
tants to, among other things, conduct be sure to keep a copy of the agenda); do you know that your employee is only
comprehensive reviews of their policies 3. All employees and independent using the approved app?”
and procedures relating to the retention contractor reps should sign the corre- Thus, implement, educate and follow
of electronic communications found on sponding applicable standard acknowl- the policies and procedures outlined
personal devices and their respective edgment form (stating that texting is above, and investigate and document
frameworks for addressing non-com- prohibited, with express limited excep- any and all instances of actual or per-
pliance by their employees with those tions) upon inception of employment ceived violations or red flags.
policies and procedures.” and no less than annually thereafter Please don’t negate this very impor-
Although your firm’s policies and (quarterly forms should be encouraged, tant issue. If you do, it could be a very
procedures manual may have previ- based upon the recent SEC scrutiny); costly omission. Act now!
ously addressed the use of personal 4. If the firm, upon prior written
email, texting and social media relative approval, permits texting via use of Thomas D. Giachetti is chairman of the
to business-related matters, they must a firm-provided app installed on the Investment Management and Securities
be reviewed and enhanced (including employee’s/rep’s personal device (there- Practice of Stark & Stark. A former investment Adobe Stock
a strongly recommended initial and by permitting ongoing firm monitoring banker and NASD registered representative.

40 INVESTMENT ADVISOR FEBRUARY/MARCH 2023 | ThinkAdvisor.com