Overview of archiving requirements and best practices to remain compliant.
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.
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:
- Rule 204-2 states that all RIA firms must maintain and preserve their required books and records for no less than five years.
- Those records have to be easily accessible.
- For the first two years, they must be kept in an appropriate office of the investment adviser.
Best Practices for RIA Archiving
- 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.
- 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.
- 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.
- Integrate Archiving into Your Customer Relationship Management (CRM) Software
Along with choosing a technology solution for achieving, 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.
- 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.
- 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.
- 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.
Learn more about RIA firm archiving requirements here.