RIA Compliance and Practice Management Blog

Registered Investment Adviser Compliance Archiving Requirements

Posted by RIA in a Box

Jan 28, 2021 2:08:50 PM

RIA Books and Records: archiving client communications and business activitiesWhen it comes to archiving, the Securities and Exchange Commission ("SEC") and state regulators wants to ensure your registered investment adviser ("RIA") firm never forgets about an email, text, social media post, or any other communication your RIA firm sends that can be received by a client or prospective client.

According to Rule 204-2 of the Investment Advisers Act of 1940, every investment adviser that is registered with the SEC is required to keep true, accurate, and current books and records about its business activities. Those activities include the above mentioned forms of communications.

Download Our Checklist on 10 Steps to Take When Selecting a 3rd Party Vendor

The years change and the SEC’s regulatory points of focus change, but its focus on advisory firms keeping clean books and records is always front and center. We expect that to continue to be true in 2021.

In this article, we’re going to share ways you can more easily keep your firm in compliance with these recordkeeping regulations.

What RIA Firms Need to Do to Stay in Compliance with Archiving Requirements

If you’re currently operating an RIA firm then we hope you have intimate knowledge of Rule 204-2 already, but if you’re exploring independence or just need a quick refresh, here’s what you need to know:

  1. Rule 204-2 states that all RIA firms must maintain and preserve their required books and records for no less than five years.
  2. Those records have to be easily accessible.
  3. For the first two years, they must be kept in an appropriate office of the investment adviser.

With that understanding, let’s look at seven must-haves for every RIA firm’s archiving methods.

Seven Compliance Archiving Must-Haves for RIA Firms

You could read advice on archiving methods for hours, but with limited time we’ve narrowed it down to seven best practices:

  1. Understand the Difference Between Backup and Archiving

    You may not be an information technology ("IT") administrator, but you still need to know some of what they deal with everyday. The biggest item to be aware of is the difference between backup and archiving. Backup protects your data with a copy of that data in case it’s lost.

    Archiving is designed for long-term storage of data. Typically, it involves moving data off the primary storage device so it can be accessed at a later time and it can’t be overwritten.

  2. Develop a System and Policies

    If you don’t know where you’re heading, you’ll never get to your destination. Every RIA firm must have written policies and procedures that detail how you’ll archive communications, what you’ll use, and when you’ll review and update them.

  3. Use Technology to Your Advantage

    Keeping track of data manually isn’t in your best interests from a time-management or an accuracy standpoint. An archiving solution that automatically grabs your emails, website blog posts, social media posts, and more, and copies them for you is one of the best additions you can make to your technology stack.

  4. Integrate Archiving into Your Customer Relationship Management (CRM) Software

    Along with choosing a technology solution for archiving, you want it to integrate with the rest of your technology stack. The most critical piece is your CRM. If you’re like most advisors, all of your client communications run through your CRM—so be sure to integrate it with your archiving system to get the full automation benefits.

  5. Regularly Review Your Archiving System

    No less than annually, your firm needs to review your compliance archiving policies and procedures. It’s more than a quick check that you’ve written them out; you should spend this time reviewing their effectiveness and make changes where you’re falling short.

  6. Know What Needs to be Reviewed

    Compliance can get messy quickly in today’s working environment where employees have gone remote. For instance, do you need to archive all of an employee’s Twitter posts, even the ones not about their job? What about a personal email sent from a work account?

    In general, the SEC only expects to review communications your RIA firm is required to archive, but if you’re making those decisions manually you can make a mistake. Setting up an archiving solution that automatically copies every email, post, and digital update is the generally best course of action.

  7. Keep It Simple

    Overcomplicating your archiving solution can be just as damaging as not taking steps to archive at all if it eats up your time and makes you less effective at providing financial guidance to your clients. An overly complex or rigid process is one you’re most likely to drift from compared to one that is quick and simple to implement.

Following these seven best practices will help your firm more easily remain in compliance with recordkeeping requirements.

What Not to Do When Archiving Communications

On the other side, it can be just as important to know what to avoid as it can be to know what to do with your RIA firm's compliance archiving responsibilities. Here are five quick “don’ts” to stay away from in your firm.

  1. Be afraid to ask questions

    There’s no shame in checking your understanding. Reach out to a compliance consultant or your chosen archiving technology partner to be sure you’re making right decisions given your firm's business model and types of communication.

  2. Save archives to vulnerable places

    Archiving all your firm’s data to a hard drive that you keep in an unlocked drawer in your office is not only asking for trouble but also will lead to compliance issues. Be sure to archive your data to a separate location and ideally use a data storage facility or vendor to help you double- and triple-back it up.

  3. Archive selectively

    When in doubt, archive everything. It’s better to provide an SEC auditor with more information than they need than to be found lacking.

  4. Forget to update regularly

    You should archive frequently and regularly. Furthermore, archiving should be automated.

  5. Make it complicated

    We’ll reiterate it once more—the policies you put in place need to be easily followed if you want everyone in your office to do what’s necessary to keep your firm in compliance.

Schedule a Demo of MyRIACompliance

A new year is the perfect time to assess your policies and discover new technology that can help you easily manage your firm’s regulatory compliance requirements. Click here to schedule a demo of MyRIACompliance to see why more than 2,000 RIA firms work with us to fulfill their SEC obligations

Topics: RIA Operations, RIA Compliance, RIA Technology

RIA in a Box LLC is not a law firm, investment advisory firm, or CPA firm. RIA in a Box LLC does not provide legal advice or opinions to any party or client. You should always consult your relevant regulatory authorities or legal counsel if applicable.

RIA Compliance & Practice Management

Stay up to date on the latest RIA compliance, operations, and technology topics.

Hear from industry experts as they keep you up to date on the latest regulatory developments and practice management topics.

Subscribe to Email Updates

Recent Posts

POSTS BY TOPIC

cta-ria-compliance

cta-ria-operations

cta-ria-technology