Compliance Alert: Stop Texting Clients!

In 2020, the Securities Exchange Commission (SEC) issued its first penalty related solely to advisors text messaging with clients. Since then, the SEC has commenced over 35 enforcement actions against firms in respect of record-keeping violations related to instant messaging between advisors and clients, and has imposed fines of more than $2.5 billion in respect of these breaches.¹ Canadian regulators aren't usually too far behind its American counterparts, so it's anticipated that this infraction will be an area of investigation and enforcement for CIRO in 2024 and 2025.

This blog explains the reason why regulators are concerned about advisors' use of unauthorized channels of communication with clients, and provides advice on how to manage clients who insist on using instant messaging to communicate with their advisors.