Safeguarding Advisory Client Assets (SIFMA AMG)
SIFMA AMG provided comments to the U.S. Securities and Exchange Commission (SEC) on the proposed new rule for safeguarding advisory…
January 31, 2023
Via Electronic Mail
The Hon. Gary Gensler
U.S. Securities and Exchange Commission
100 F Street NE
Washington, DC 20549-1090
Re: Investment Adviser Recordkeeping Requirements
Dear Chair Gensler:
The undersigned trade associations (the “Associations”) respectfully submit this letter to the Securities and Exchange Commission (the “SEC” or the “Commission”) concerning the scope and application of the recordkeeping provisions of the Investment Advisers Act of 1940 (the “Advisers Act”) to text messaging and other electronic communications.
Our members support SEC market oversight and share the view that the preservation of books and records in compliance with the SEC’s rules is critically important. As Chair Gensler recently acknowledged in public statements, the SEC’s recordkeeping rules have been an essential part of market integrity since the 1930s, and as technology changes, it is “even more important” that registrants maintain and preserve communications.”1 However, we are strongly concerned that the SEC is attempting to exceed its authority under the Advisers Act and engaging in rulemaking by enforcement through its current sweep regarding off-channel communications,2 which has been widely covered in the press.3 Further, in interpreting the Advisers Act rules overbroadly, we are concerned that the SEC action here will have the unintended consequence of discouraging advisers from setting standards and practices that are above and beyond legal and regulatory requirements.
In connection with this Enforcement sweep, we understand that the SEC has asked each of the investment advisers involved in the sweep to have the personal phones of several employees imaged and reviewed, and that the SEC seeks evidence of any off-channel business communication, regardless of its nature. As set forth in greater detail below, this approach exceeds the scope of the recordkeeping provisions in the Advisers Act, raises concerns that the SEC will seek to shoehorn instances of non-compliance by employees of firms with reasonably designed policies and procedures into enforcement violations, and gives rise to serious privacy implications.