The inappropriate use of email can spell disaster for registered investment advisors (RIAs), particularly for firms with multiple offices or remote workers, and for those with employees who use personal devices to transact business.
There are measures that RIAs can take to protect themselves in the event of issues involving indiscriminate email usage or regulatory audits. An email policy is a start, but advisors are best served – and in compliance – when they actively monitor emails and enforce policy.
Email Policy Basics
Those responsible for human resources or in charge of firm management often take the lead in drafting a RIA’s email usage and retention policies, but the strongest policies typically include input from outside experts such as outside legal counsel or information technology (IT) service partners.
At minimum, a good email policy will state that the contents of every email will not breach firm or client confidentiality. The policy should also explicitly explain that any technology-related tools, devices and services owned by the firm are to be used solely for the purpose of transacting business and are not for personal use.
The firm’s email retention policy may also be spelled out. In the event of an audit, RIAs must be able to show that their email policy complies with Rule 204-2 of the Investment Advisers Act, the Books and Records Rule, which requires emails to be retained for five years after the fiscal year they were sent.
All RIA partners and employees should sign and date a written policy when it is presented, with the original being kept by the firm and a copy given to the signatory.
Of course, no matter how well written, a firm’s email policy must be enforced to be effective and must stand up to regulatory audits. To comply with SEC regulations, RIAs must be able to prove they are systematically checking emails. Random, periodic assessments of emails will not suffice as the firm’s email audit protocol.
RIAs and their IT professionals should be working with programs or providers to monitor outbound and inbound emails actively, employing a rules-based approach to look for number and word patterns. The auditing process should flag potentially suspicious or undesirable content, including spotting language such as “I guarantee…,” or “I promise…”, and also flag emails containing confidential information. Firms must also be vigilant about blocking inbound email spam, as well as outbound emails to undesirable sites.