SEC Rule 204-2 mandates RIAs’ books and records should be true, accurate and current — whether they are stacked in physical storage units or exist in the digital clouds of the 21st century. In this era of heightened scrutiny and digitization, it’s imperative to make sure your recordkeeping is both meticulous and aligned with the complex regulatory landscape governing the industry.

Let’s explore the major categories of records mandated for RIAs and the nuances associated with each, from financial records to client communication logs.

Business and financial accounts. In the realm of financial transactions, a comprehensive set of records is required. This entails maintaining journals, ledgers, checkbooks, bank statements and all financial documents related to your investment advisory business. The purpose is not only to track financial transactions but also to safeguard the physical documents themselves. In an industry where every detail counts, easy access to these records is vital.

Investment advice and transactions in client accounts. When it comes to providing investment advice, every interaction matters. The SEC mandates that all written communications related to recommendations, advice and securities transactions be archived. This extends to emails, attachments and other communications, constituting a complete trail of the decision-making process. This comprehensive recordkeeping assures compliance and offers protection in the event of legal disputes.

Client communications and recommendations. Communication with clients and prospects isn’t just about keeping transaction receipts — it includes retaining originals of all communications received and copies of those sent. Embracing technology solutions for streamlined collection, storage, review and retrieval can simplify this process. It is especially crucial when making recommendations, as these records can be a safeguard in the face of potential legal challenges.

Authority to conduct business in client accounts. Keeping an accurate record of licenses and designations held by your advisers and staff is vital. The modern landscape of remote work and online consultation necessitates meticulous documentation, both for your staff and your firm. Alignment between your registrations and the services you provide is essential, and maintaining records supports this alignment.

Advertising and performance records. In the age of digital advertising, meticulous recordkeeping is paramount. SEC Rule 204-2 requires the retention of all communications circulated to even one person — from printed materials to social media posts. Given the stringent scrutiny by regulatory bodies, particularly in the realm of performance advertising, comprehensive records of the advertising process are a must.

Code of ethics rule. Your firm’s code of ethics and its history over the past five years should be maintained. In addition, records of any code violations, “watch lists” or “grey lists” are essential. These records can serve as a crucial line of defense in scenarios involving former employees or other legal disputes.

Registration and client disclosure documents. Each disclosure document sent to clients or prospective clients, along with the dates of dissemination, must be preserved. This involves the retention of every disclosure document ever sent, with precise records of when each was provided.

Solicitor arrangements. If your firm utilizes solicitors for referrals, it’s paramount to thoroughly document the process. This includes maintaining acknowledgments of solicitor disclosures, agreements with solicitors and a list of compensated parties. The new advertising and solicitation rule introduces additional requirements for retaining records of testimonials and endorsements. States also have their requirements, which sometimes extend beyond the SEC’s. These can be complicated, and they require proper documentation.

Policies and procedures under compliance program rule. Any changes made for compliance purposes should be diligently documented. This protects your firm legally while also demonstrating your proactive approach to compliance issues.

Political contributions. Engaging with politicians or political parties requires meticulous documentation. Records of political contributions made by your firm or staff should be kept to maintain transparency and compliance.

Custody of client assets. For RIAs that have custody of client assets, the SEC sets forth stringent requirements. A separate ledger for each account, including records of all transactions, is a prerequisite.

Proxy voting on behalf of clients. When voting on behalf of clients, adherence to Rule 206(4)-6 is crucial. This entails keeping copies of proxy statements, records of votes and correspondence related to proxy voting.

In matters of compliance, precision is paramount. It’s not only about checking boxes — it’s about safeguarding your clients and your firm, providing transparency, and upholding the highest standards of integrity. The SEC’s Rule 204-2 underscores the critical importance of meticulous recordkeeping. Navigating the complexities of compliance can be a daunting task, but you don’t have to go it alone.

This report was excerpted from the AdvisorLaw blog. Read the complete article here.