What constitutes an electronic communication under SEC and FINRA rules has evolved beyond the traditional written, person-to-person interaction such as email, says Marc Gilman, general counsel of Theta Lake. Collaboration platforms, modern chat systems, and video marketing apps now trigger many of the same regulatory compliance obligations, he says.
Gurbir Grewal, the Securities and Exchange Commission’s newly minted director of Enforcement Divsion, gave a wide-ranging speech in October outlining his views on compliance, and touching on topics from Reg BI to electronic communications recordkeeping. A few days later, news of the SEC’s horizontal sweep of broker-dealers’ digital communications channels compliance broke, providing an exclamation point on the director’s presentation.
The persistent business criticality of electronic messaging systems coupled with the SEC’s sweep presents a perfect opportunity to revisit compliance best practices for digital communications. A refresher is also timely given the rapid adoption of new collaboration tools like Zoom, Microsoft Teams, Slack, and Cisco WebEx during the pandemic.
The baseline rules requiring broker-dealers to capture, retain, and supervise electronic communications are found in SEC Rule 17a-4 (recordkeeping and retention in non-rewritable, non-erasable format) as well as FINRA rules 3110 (supervision) and 2210 (communications with the public). FINRA has issued several regulatory notices pertaining to the use of social media and SMS as well as a set of Covid-19 FAQs in April 2020 and updates to advertising FAQs in September 2021, which provide requirements for collaboration and online video.