SERIES 6 EXAM ASKS QUESTIONS ABOUT COMMUNICATIONS WITH CUSTOMERS AND KEEPING WRITTEN RECORDS OF THOSE COMMUNICATIONS

Series 6 Exam candidates should expect  that several Series 6 Exam questions deal with FINRA and SEC rules on proper communications with retail customers and keeping written records of such communications. The  Record-Keeping Rules state that a brokerage firm has an obligation to keep written records of advertising material sent to customers by its registered reps. Such records must be in writing or electronic form, and be signed and dated by a registered principal of the broker/dealer. 

But many reps do not know that the brokerage firm is also bound to keep records of all communications, even those that are sent or received through social media, such as Facebook, Twitter, et al.

Yes, the Record-Keeping Rule 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 6 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 listing 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 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 kept no written records of the nature of these communications, what was said, or how it was presented.

Bob Eder devotes Chapter One of his Study for the Series 6 Exam to Communications with retail customers and discusses the obligations of the Record-Keeping Rules throughout the text. 

Study for the Series 6 Exam is available from Amazon in both paperback and Kindle e-book versions. Here is the link to Bob Eder's Study for the Series 6 Exam on Amazon.

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For questions about Bob Eder's Study for the Series 6 Exam, or questions in general about the Series 6 Exam, or about the Record-Keeping Rules, simply 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.

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