SIFMA Calls on SEC to Amend Communications and Record Retention Rules
SIFMA and the SIFMA Asset Management Group ("SIFMA") urged the SEC to "modernize the communications and records retention rules applicable to broker-dealers, investment advisers, and security-based swap dealers."
In a letter to SEC Chair Paul Atkins, SIFMA said the SEC's communications and recordkeeping framework is outdated, overly broad, and applied under a strict liability standard that fails to account for firms' good-faith compliance efforts. The rules at issue—Exchange Act Rules 17a-4 ("Records to be preserved by certain exchange members, brokers and dealers"), and 18a-6 ("Records to be preserved by certain security-based swap dealers and major security-based swap participants") and Advisers Act Rule 204-2(a)(7) ("Books and records to be maintained by investment advisers")—govern how broker-dealers, investment advisers, and swap dealers retain and produce business communications. SIFMA said the SEC's recent off-channel communications cases, which resulted in more than $2.2 billion in penalties, highlight the need to modernize these requirements.
To address these issues, SIFMA recommended that the SEC:
- Narrow the Scope of Retained Electronic Communications. SIFMA urged the SEC to focus on a clearly defined set of business-related client communications. The association proposed limiting retention to client-facing, substantive messages related to investment advice or securities transactions, while explicitly excluding non-substantive materials such as emojis, AI-generated transcripts, collaborative platform inputs, and routine logistical messages. SIFMA also called for removing the ambiguous "business as such" standard to reduce uncertainty about which communications must be retained.
- Establish a Compliance Safe Harbor. SIFMA recommended creating a safe harbor for firms that implement and maintain reasonable policies and procedures to retain required communications. The association said this would replace the current strict liability approach and ensure that firms making good-faith efforts to comply are not penalized for isolated or inadvertent lapses.
- Preserve Supervisory Responsibilities Without Expanding Retention. SIFMA emphasized that its proposal would not reduce firms' supervisory duties but would instead give them flexibility to determine how best to meet those obligations. The association said firms should be able to tailor their recordkeeping and oversight processes to their business models rather than follow a rigid, one-size-fits-all approach. SIFMA noted that firms may still choose to retain communications beyond what the amended rules require for internal compliance or legal purposes.
- Harmonize Retention Periods at Three Years. SIFMA called on the SEC to standardize all recordkeeping requirements across broker-dealers, investment advisers, and security-based swap dealers at a uniform three-year period. The association said this change would simplify compliance for dual registrants, eliminate the need to separate communications by registration category, and maintain sufficient time for supervision and regulatory review. SIFMA argued that harmonization would reduce unnecessary costs and complexity without compromising investor protection.
- Eliminate Outdated Third-Party Undertakings. SIFMA urged the SEC to repeal Rule 17a-4(i), which requires third-party service providers to file undertakings agreeing to provide the SEC direct access to broker-dealer records. The association said this rule has become obsolete, as modern cloud systems are designed to prevent provider access by default. SIFMA argued that the requirement deters the use of secure modern technology, serves little practical purpose, and duplicates existing SEC enforcement tools. SIFMA encouraged the SEC to eliminate the provision following a cost-benefit and historical-use review.
SIFMA also included draft amendments to the communications and records retention rules as attachments to the letter, outlining proposed definitions, exclusions, and safe harbor provisions.