Industry Groups Ask SEC to Update Adviser Recordkeeping Rule

The Investment Adviser Association ("IAA") and the Investment Company Institute ("ICI") urged the SEC to update the "recordkeeping rule" under the Investment Advisers Act, a framework largely unchanged since 1961.

In a joint letter the associations argued that the rule is wholly unfit for today's digital, cloud-based environment and has generated a wave of enforcement actions that are disproportionate to any actual investor harm. They referred to the SEC's recent "off-channel communications" sweep — targeting advisers for business conversations conducted over personal devices and unapproved apps — which penalized firms even when violations were minor, inadvertent, and caused no harm to clients.

The associations support a formal safe harbor that would shield advisers who maintain compliance programs reasonably designed to retain required communications. They also urge the SEC to clarify that an inadvertent recordkeeping lapse does not automatically trigger liability under the broader Compliance Program Rule. They asked the SEC to abandon its near-strict-liability enforcement approach, a posture that has imposed $2.3 billion in penalties since fiscal year 2022 without producing any identified investor benefit. 

The associations also pressed for a structural overhaul: a technology-neutral framework that can evolve as new tools emerge, a narrower scope of required records focused on what actually serves regulatory oversight, and explicit consideration of the cybersecurity and data privacy risks that broad retention mandates create.