RIA Communication Compliance

Registered Investment Advisors (RIA) face strict regulations to ensure the privacy of sensitive data, including the need to capture and store copies of external communications with clients. While this is easy enough to do when employees are using company-owned desktop computers and legacy enterprise communication channels such as phone or email for all of their communications, it becomes more complicated once personal mobile devices and the entire range of popular messaging apps come into play. 

Today’s clients expect to be able to communicate with their financial advisors via SMS or Whatsapp, for example, and most are happy to comply in order to provide a good customer experience. While it may be tempting to prohibit the use of these channels to avoid non-compliance, today’s consumers would likely not stand for that as they are used to conducting business online. Investment firms must, therefore, have policies in place to ensure that they remain in full compliance of all communication laws even when using mobile devices.

What Rules are Relevant to RIAs? 

There are two main pieces of legislation that regulate how RIAs are to operate when it comes to keeping records of communications:

  • The Securities Exchange Act of 1934 – Rule 17a-4(b)(4) under this act requires broker-dealers to keep records of all of their business-related communications. It is not enough to just prohibit employees from using consumer messaging apps because it’s unlikely that everyone would comply with such a prohibition. Instead, there must be a system in place that captures all such communications.
  • The Investment Advisers Act of 1940 – Rule 204-2(a)(7) under this act states that RIAs have to store records of all written communications that have to do with recommendations of investment advice; receipt or delivery of funds or securities; and any purchase or sales order executions. This rule also requires RIAs to implement policies related to the requirements. 

Best Practices for RIA Communication Compliance

Because a blanket prohibition of using messaging apps is not realistic, RIAs must instead implement a detailed and thorough communication-capture policy to make sure that they comply with all regulations. When creating such a policy, following are 5 best practices to keep in mind:

  • Automate Archiving – people use their mobile devices because it is easier. Adding a complicated manual process to an investment adviser’s to-do list is essentially asking for non-compliance. Rather, the capture and archiving of messages should take place automatically without any involvement from the investment adviser. 
  • Make it Easy to Retrieve – once a conversation has been captured and archived, it must be filed and organized in a way that makes it easy to retrieve should the need arise. Files should be searchable so that they can easily be found in case of an internal or external audit.
  • Involve Employees in the Process – it’s the employees who will have to comply with the policies put in place, so it is important to involve them in the process so that they fully understand what is expected of them. Explaining the policy in clear and simple language will leave no room for loopholes or doubts. 
  • Integrate with CRM and Other Systems – RIAs are used to recording information about client conversations in the CRM or other systems. Make sure that any communication capture solution adopted by the company can easily integrate with CRM so that all client information can be stored in one place. 
  • Enforce Policies – regulators will not be satisfied with policies in place if they are not implemented and enforced. Any red flags should be dealt with quickly and employees who violate the policy must face consequences including termination. 

How LeapXpert Can Help

LeapXpert understands that in today’s world everyone is communicating via messaging apps. Our cutting-edge SaaS solution is designed to address the needs of RIAs, enabling investment firms to easily and automatically archive client conversations that take place on all the most commonly used apps. Contact us to discuss how LeapXpert can help keep you compliant with all communication regulations.