The Investment Counsel Association of American
(ICAA) is asking the SEC to clarify its expectations concerning email. The issue has risen to prominence as more communication is conducted by email even as the SEC and other investigators are finding email to be a central source of evidence in investigation.
To get a better handle on the issue, the ICAA sent a letter
asking for guidance from the SEC to Paul Roye, director of the Division of Investment Management and Lori Richards, director of the Office of Compliance Inspections and Examinations in mid-November.
"We are writing to reiterate our support for needed clarification of the Commission’s expectations as to investment advisers’ retention, production, and surveillance of e-mail," wrote David Tittsworth
, executive director of the ICAA in the missive.
Tittsworth noted that since the start of the fund scandal probes a year ago, SEC examiners have begun "requesting the production of e-mail during investment adviser examinations as a routine matter."
"Today, it is common practice during SEC inspections of investment advisers for the examiners to request that all firm e-mail or all e-mail to or from certain individuals be produced promptly in an electronically searchable format. In addition to these unprecedented inspection requests, SEC staff for the first time has suggested that investment advisers have an obligation to review or monitor e-mail of employees. These inspection requests and the staff’s comments regarding e-mail surveillance represent a significant departure from past practices," he added in the letter.
The new practices have are mean fund advisors substantial compliance costs, according to the ICAA. In one case, a "larger firm" that receives 20,000 emails per day in 1,000 boxes told the ICAA that it spent nearly $350,000 to capture and search email. Those costs included hardware, software, and some labor costs.
"We believe the vast majority of investment advisers have a genuine desire to be cooperative and compliant regarding these and other compliance issues, but they need to know on a prospective basis what their legal obligations are," added Tittsworth, noting that it is "a matter of fundamental fairness."
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