5 Keys to a Texting Policy That Will Stand Up to SEC Scrutiny

3. All employees and independent contractor reps should sign the corresponding applicable standard acknowledgment form (stating that texting is prohibited, with express limited exceptions) upon inception of employment and no less than annually thereafter (quarterly forms should be encouraged, based upon the recent SEC scrutiny); 

4. If the firm, upon prior written approval, permits texting via use of a firm-provided app installed on the employee’s/rep’s personal device (thereby permitting ongoing firm monitoring of such communications), then a corresponding different acknowledgment reflecting the same should be used; and, 

5. If the firm, upon prior written approval, permits texting via the use of a firm-provided device (thereby permitting ongoing firm monitoring of such communications), then a corresponding acknowledgment should be used. 

Remember, as indicated above, policies and procedures are only effective if they are followed, including ongoing reinforcement of the firm’s policies (per the meetings and corresponding agendas referenced above). Permitting ongoing monitoring is only effective if you can demonstrate that actual monitoring has occurred in the same manner as the firm performs ongoing email monitoring. Maintain regular ongoing (recommended monthly) records of doing so, and that you have addressed any corresponding content concerns. 

A Caveat

Regardless of your policies and procedures, don’t be surprised if a regulator asks you to prove a negative: “How do you know that your employee is not texting?” or if he/she is using an app, “How do you know that your employee is only using the approved app?”

Thus, implement, educate and follow the policies and procedures outlined above, and investigate and document any and all instances of actual or perceived violations or red flags.

Please don’t negate this very important issue. If you do, it could be a very costly omission. Act now!

Thomas D. Giachetti is chairman of the Investment Management and Securities Practice of Stark & Stark. A former investment banker and NASD registered representative

(Image: Adobe Stock)