The Investment Company Institute (ICI) is urging the Securities and Exchange Commission to modernize its Recordkeeping Rule to better reflect the realities of the 21st Century.
In a letter to the SEC, the ICI and the Investment Adviser Association recommended that the SEC update the Investment Advisers Act of 1940 to reflect the digital age.
“We applaud Chairman Atkins for his work to refocus the SEC’s enforcement efforts on cases correcting investor harms. Off-channel communications cases involving asset managers under prior SEC leadership saw vastly disproportionate penalties levied for employees using personal devices to send text messages,” ICI President and CEO Eric J. Pan said. “Updating the recordkeeping framework would be a significant step toward achieving our shared goals of investor protection and strengthening market integrity.”
ICI said the current rule was originally drafted in 1961, a time when organizations communicated differently. Those rules do not account for cybersecurity needs, the organizations said. They recommended the Recordkeeping rule be adapted to new technologies and business practices while striking a balance between investor protection measures and the increasing burdens of retention requirements.
The organizations said that under previous SEC leadership, advisors were penalized for recordkeeping violations despite good faith efforts to comply. However, the current Commission has said “these cases identified no direct investor harm from those violations, produced no investor benefit or protection, and demonstrate what the current Commission views as a misinterpretation of the federal securities laws, a misallocation of Commission resources, and a bias for volume of cases brought versus matters of investor protection.”
The organizations said they look forward to revised guidelines that hold advisors accountable while ensuring robust protection for investors. Additionally, the letter urged the SEC to consider potential cybersecurity and data privacy risks, and address them alongside retention requirements to prevent inadvertent exposure for retail advisors.