Unveiling Strategies to Tackle Off-Channel Communication Challenges: Insights from NSCP Currents Live Webinar
The recent wave of enforcement actions underscores the critical importance of maintaining robust recordkeeping practices, particularly in the realm of off-channel communication.
Since December 2021, over 37 firms have collectively paid over $2.8 billion in penalties to regulators, highlighting the pervasive nature of recordkeeping failures. These breaches, as outlined in SEC orders, reveal a concerning trend wherein employees engaged in off-channel communications, often via personal text messages, without proper preservation, which is a violation of federal securities laws.
These lapses in recordkeeping extended across multiple levels of authority within firms, potentially impeding SEC investigations by depriving regulators of crucial off-channel communications. To address this challenge, firms are urged to implement comprehensive strategies for uncovering and addressing off-channel communication.
One key approach involves conducting thorough communication reviews, encompassing not only email but also social media platforms and text messaging. By leveraging best practices and targeted keyword searches, firms can effectively uncover off-channel communications, enabling them to address potential violations swiftly and decisively.
Addressing off-channel communication necessitates a multi-faceted approach, encompassing policy formulation, rigorous training, and robust attestation protocols. Firm policies should be tailored to the business model, addressing internal and external communications while adhering to applicable privacy regulations. Regular training sessions, coupled with clear repercussions for violations, reinforce adherence to policies and foster a culture of compliance.
Technology also plays a pivotal role in navigating the regulatory landscape, with vendors offering solutions for archiving off-channel communications. However, firms must exercise due diligence in selecting vendors, considering factors such as operating history, reviews, and privacy concerns before entering into contracts.
As we navigate the complexities of regulatory compliance, it's imperative to remain vigilant and proactive in addressing off-channel communication challenges. By adopting a holistic approach encompassing policy, training, and technology, firms can navigate the regulatory landscape with confidence and integrity.
This information comes from Myles Blechner, Director, Investment Advisory, ACA Group, Kim Chapman, Chief Compliance Officer, Berthel Fisher & CO Financial Services, and Patricia (Trish) Flynn, Vice President, CCO, PGIM Portfolio Advisory who appeared on our NCSP Currents Live webinar "How to Uncover and Address Off-Channel Communications" on February 28, 2024.
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