While the Securities and Exchange Commission's texting crackdown hit a fever pitch during former Chairman Gary Gensler's term, the SEC under new Chairman Paul Atkins as well as the Financial Industry Regulatory Authority are still levying texting and off-channel communication-related fines, albeit at a much slower pace.
Atkins noted during a recent speech that the agency "must go after cases of genuine harm and bad acts, but we must view cases of benign or innocent actions differently. In the past, we have seen examples of enforcement actions in areas, such as retention of books and records, that consumed excessive Commission resources not commensurate with any measure of investor harm."
In defending the texting crackdown last October, Gensler stated: "Books and records are really important to control the risk in your firms." While some brokers and firms are using off-channel communications for "convenience," others are not.
In an Oct. 15 letter, the Securities Industry and Financial Markets Association urged the SEC to modernize the communications and records retention rules for advisors and brokers.
The settlements in the SEC’s off-channel communications cases "starkly exposed the challenges of complying with the existing communications retention requirements under federal securities laws," SIFMA said. "The SEC brought over 90 cases, imposing penalties of over $2.2 billion and burdensome undertakings on settling firms."
SIFMA asked the SEC to narrow the retention obligation to client-facing business communications substantively related to investment or securities advice or transactions, consistent with the original intent of the rules.
"The expansion of 'communications' to include virtually all forms of electronic messaging has created unmanageable compliance burdens and costs without corresponding investor protection benefits," SIFMA said.
The agency should also remove the “business as such” requirement, which would reduce uncertainty about the types of communications firms are required to retain, SIFMA said.
See the gallery for 6 texting compliance tips, in the words of Tiffany Duncan-Magri, senior regulatory advisor at the compliance tech firm Smarsh.
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