Off-channel communications for investment advisers

An SEC-registered adviser must keep its written business communications about advice, recommendations, orders and client funds, whatever channel they travel on, under Rule 204-2(a)(7). A text, WhatsApp or Signal message about a client's portfolio is as much a required record as an email. A message the firm cannot capture is an "off-channel" communication, and the practical choice is to capture the channel or prohibit business use of it, and then enforce whichever you chose.

Beginning in fiscal year 2022 the SEC brought a long series of enforcement cases over these records, against broker-dealers first and then advisers. The current Commission has said it regards those cases as misdirected, and its regulatory agenda includes amending the adviser recordkeeping rule for electronic communications. Neither has changed the rule. As of this guide's date, Rule 204-2(a)(7) reads as it did when those cases were brought.

What the rule requires

Rule 204-2(a)(7) requires an adviser to make and keep originals of all written communications received and copies of all written communications sent relating to:

1. any recommendation made or proposed to be made, and any advice given or proposed to be given
2. any receipt, disbursement or delivery of funds or securities
3. the placing or execution of any order to purchase or sell a security (with additional allocation and affirmation records for transactions subject to Exchange Act Rule 15c6-2(a))
4. predecessor performance, and the performance or rate of return of managed accounts, portfolios or securities recommendations

Unsolicited market letters and similar general communications not prepared by or for the adviser need not be kept.

Three points follow from the text.

• The medium does not matter. The rule says "written communications." It does not list email, and it does not exempt text messages, messaging apps, social media direct messages or chat features in other software.
• The content decides. A text confirming a meeting time is not on the list. A text saying "sell half the position" is. In practice nobody can sort messages one by one in real time, which is why firms decide channel by channel.
• Personal devices are included. The rule follows the communication, not the ownership of the phone.

How long, and how

Records under (a)(7) must be kept in an easily accessible place for five years from the end of the fiscal year in which the last entry was made, the first two years in an appropriate office of the adviser (Rule 204-2(e)(1)).

Electronic storage is permitted under Rule 204-2(g) if the adviser arranges and indexes the records so any one can be found, can promptly produce a legible, true and complete copy or printout and the means to view it, keeps a separate duplicate copy, and maintains procedures to safeguard the records from loss, alteration or destruction, to limit access to authorized personnel and the Commission, and to ensure that any scan of a paper original is complete, true and legible.

Supervision and the compliance rule

The cases did not stop at recordkeeping. Advisers were also charged with failing reasonably to supervise their personnel under Section 203(e)(6) of the Advisers Act. Rule 206(4)-7 requires written policies and procedures reasonably designed to prevent violations, which for this purpose means procedures that actually keep business off unapproved channels, not only a sentence prohibiting it.

The enforcement record

• 27 September 2022 (Press Release 2022-174): 15 broker-dealers and one affiliated investment adviser agreed to combined penalties of more than $1.1 billion. These were the first large cases.
• 9 February 2024 (Press Release 2024-18): 16 firms, including dually registered firms and affiliated advisers, more than $81 million combined.
• 14 August 2024 (Press Release 2024-98): 26 broker-dealers, advisers and dual registrants, $392.75 million combined. Three self-reported and paid less.
• 13 January 2025 (Press Release 2025-6): nine investment advisers and three broker-dealers, $63.1 million combined, including private fund managers. One firm that self-reported paid a reduced penalty.

The order against Kohlberg Kravis Roberts & Co. (Release IA-6814, 13 January 2025), one of the last group, shows how these cases were framed. KKR had policies requiring approved channels, told its personnel not to use unapproved apps for business, and archived what went through approved methods. According to the order, personnel at various levels, including senior levels, still sent and received off-channel messages relating to advice from at least December 2019, and those were not preserved. The firm was charged under Section 204 and Rule 204-2(a)(7), and with failure to supervise. It admitted the facts and agreed to an $11 million penalty.

In each of these groups, the press releases say, the firms admitted the facts set out in their orders.

Where the SEC stands in 2026

• The settlements stand. On 14 April 2025 (Release 34-102860, IA-6874) and 26 June 2025 (Release 34-103330, IA-6890), the Commission denied motions by firms that had settled earlier to modify their orders, which they argued should match the January 2025 settlements because those omitted certain undertakings. It cited the strong interest in the finality of settlements.
• The Commission has disowned the program. Announcing its fiscal year 2025 enforcement results on 7 April 2026 (Press Release 2026-34), the SEC said the prior Commission had brought 95 actions and $2.3 billion in penalties since fiscal year 2022 for failing to preserve off-channel communications, that these cases identified no direct investor harm, and that the current Commission views them as a misinterpretation of the securities laws and a misallocation of resources.
• A rule change is on the agenda. The Commission's regulatory agenda lists "Amendments to Investment Adviser Recordkeeping Rule" (RIN 3235-AN66): the Division of Investment Management is considering recommending amendments to Rule 204-2 addressing the scope of, and compliance burdens for, electronic communications, with a proposal targeted for October 2026. We had not found a published proposal when this guide was updated. A proposal would then need comment and adoption before anything changed.

What that means for an adviser today: large penalties for missing texts are less likely, but the obligation is unchanged, and a firm that cannot produce its required records about advice in an examination is out of compliance with Rule 204-2. The same messages are also what a firm will need in a client dispute.

Controls that work

1. Decide the approved channels and write them down: firm email, and any messaging tool the firm can capture and archive.
2. Capture what you approve. If clients will text, give advisers a business number or app that archives. Then test it periodically to show messages actually arrive in the archive.
3. Prohibit the rest for business, including personal texting, WhatsApp, Signal, iMessage, social media direct messages and disappearing messages.
4. Say what to do when a client uses the wrong channel. A common procedure: do not discuss the substance there, reply on an approved channel, and forward or capture the incoming message so it is kept.
5. Train at hire and annually, and get a written attestation that the person has not used unapproved channels for business.
6. Look for evidence. Email review that flags phrases like "text me" or "WhatsApp me," and references to conversations that do not appear in the archive, finds the problem before an examiner does.
7. Discipline consistently when the policy is broken, and record it.
8. Review it in the annual compliance review under Rule 206(4)-7, with the testing documented.

Who this applies to

Rule 204-2 applies to advisers registered with the SEC, a solo adviser included. State-registered advisers are subject to their state's books and records rules, which may be modeled on the federal rule but should be checked directly.

Common questions

Can financial advisors text clients?

Yes, if the firm captures and keeps the texts that are required records. A texting arrangement the firm cannot archive should not be used for communications about advice, orders or funds.

Is WhatsApp allowed for investment advisers?

Only through a setup the firm can capture and archive, and only if the firm approves it. Ordinary WhatsApp on a personal phone is off-channel.

Do I have to keep text messages?

Texts that relate to advice or recommendations, the movement of funds or securities, orders, or performance are required records under Rule 204-2(a)(7), kept for five years from the end of the fiscal year of the last entry.

Has the SEC stopped enforcing off-channel communications?

The current Commission has said it regards the earlier cases as misguided and has put a rule change on its agenda. The rule itself has not changed, and examiners can still cite a firm that does not keep required records.

Does using a personal phone change anything?

No. The rule turns on what the message is about, not who owns the device.

Keep the channels you approve

Luna's email archive keeps every business email as it arrived for your retention period and flags messages that steer clients toward text or messaging apps. It covers email only. The electronic communications policy template sets out approved channels, the response to off-channel contact and attestations, and the books and records template covers retention.