SERIES 66 CANDIDATES, 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 66 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 66 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’s investigations uncovered pervasive and longstanding uses of unapproved communication methods, known as off-channel communications, at all 16 firms. As described in the SEC’s orders, the broker-dealer firms admitted that, from at least 2019 or 2020, their employees communicated through personal text messages about the business of their employers. The investment adviser firms admitted that their employees sent and received off-channel communications related to recommendations made or proposed to be made and advice given or proposed to be given. The firms did not maintain or preserve the substantial majority of these off-channel communications, in violation of the federal securities laws. By failing to maintain and preserve required records, some of the firms likely deprived the SEC of these off-channel communications in various SEC investigations. The failures involved employees at multiple levels of authority, including supervisors and senior managers."

https://www.sec.gov/news/press-release/2024-18

In this Press Release, the SEC is stating that the penalized firms have allowed their registered reps and I.A. reps to use digital means and/or social media to contact and communicate with their clients, yet the firms have kept no written records of the nature of these communications, or what was said, or how it was presented. These facts constitute serious violations of the Record-Keeping Rule.

Here is the link to NASAA's Test Specifications for the Series 66 Exam. See Section IV (G) (5) (5.1 - 5.3).

Study for the Series 66 Exam is available from Amazon in both paperback and Kindle e-book versions. Here is the link to Bob Eder's Series 66 book on Amazon. 

For questions about Bob Eder's Series 66 Manual, Study for the Series 66 Exam, or questions in general about the Series 66 Exam, or about the Record-Keeping Rule and/or Off Channel 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. 

See Bob Eder's Author Page on Amazon.com.

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