SERIES 65 STUDENTS, PLEASE NOTE THAT THE RECORD-KEEPING RULE APPLIES TO "OFF CHANNEL" COMMUNICATIONS WITH RETAIL CLIENTS THROUGH SOCIAL MEDIA, E-MAIL, AND ALL OTHER DIGITAL PLATFORMS: WRITTEN RECORDS MUST BE KEPT!

From time to time, we use this blog to talk about the Record-Keeping Rule that requires both investment advisers and broker/dealers to create and maintain written records of all communications received from and directed to retail customers and clients. Record-Keeping is certainly reflected in NASAA's Test Specifications for the Series 65 Exam. See Section IV (G), especially Subsection 5 (5.1 through 5.3) which covers communications with customers through social media, e-mail, digital messaging, and all other website and internet platforms. (These communications are known as "off channel.")

That this is an important topic on the Series 65 Exam is underscored by an SEC Press Release dated February 9, 2024, announcing that the SEC has discovered serious violations of the Record-Keeping Rule by 16 firms, and the names of the firms which the SEC has fined more than $81 million in total.

Here's what the SEC stated about these 16 firms:

"The SEC’sinvestigations uncovered pervasive and longstanding uses of unapprovedcommunication methods, known as off-channel communications, at all 16 firms. Asdescribed in the SEC’s orders, the broker-dealer firms admitted that, from atleast 2019 or 2020, their employees communicated through personal text messagesabout the business of their employers. The investment adviser firms admittedthat their employees sent and received off-channel communications related torecommendations made or proposed to be made and advice given or proposed to begiven. The firms did not maintain or preserve the substantial majority of theseoff-channel communications, in violation of the federal securities laws. Byfailing to maintain and preserve required records, some of the firms likelydeprived the SEC of these off-channel communications in various SECinvestigations. The failures involved employees at multiple levels ofauthority, including supervisors and senior managers."

https://www.sec.gov/news/press-releas...

In this Press Release, the SEC is stating thatthe penalized firms allowed their registered reps and I.A. reps to use digital meansand/or social media to contact and communicate with their clients, yet the firms kept nowritten records of the nature of these communications, or what wassaid, or how it was presented.

Here is the link to NASAA's Series 65 Test Specifications. 

Study for the Series 65 Exam is available from Amazon in both paperback and Kindle e-book versions. Here is the link to Bob Eder's book on Amazon.

For questions about Bob Eder's Series 65 manual,  Study for the Series 65 Exam,  or questions in general about the Series 65 Exam, or about Digital Communications, feel free to email Bob Eder at bobeder@bobeder.net.

Bob Eder received his Juris Doctor (J.D.) degree from the University of Utah, Quinney College of Law, in 2001. 
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