Compliance Solutions for Investment Advisers

FAQs — Electronic Communications

 

Are investment advisers permitted to use electronic communications (email, facsimile) to deliver required information to clients?

Yes, investment advisers may electronically deliver required reports and other information to clients, provided that certain conditions are met.

What are the conditions for sending information electronically?

SEC guidance has stated that the electronic distribution of required reports and other information to clients must satisfy the following three elements: Notice, Access and Evidence of Delivery.

What is the “notice” element?

The electronic communication must provide timely and adequate notice to clients that information for them is available. “Timely” means at least by the time that paper reports or information would be sent out.

What is the “access” element?

Those who are provided with required reports and other information electronically should have access comparable to that of a paper document. The use of the electronic medium should not be so burdensome that clients cannot effectively access the information provided. The client must also have the opportunity to print out the document or retain it (by saving it to a disk or hard drive, etc.).

What is the “evidence of delivery” element?

When providing electronic delivery of required reports and other information, an adviser should have reason to believe that any means selected will result in good delivery.

What are some examples of evidence of delivery?

Some examples of evidence of delivery are:

  • Hard Evidence of Receipt. Obtaining evidence that a client actually received the information (email return receipt or confirmation of accessing, downloading, or viewing a required report).
  • Informed Consent. Obtaining from the client an informed consent to receive the information through specified electronic media coupled with notice and access as described above. An informed consent should include a description of: (i) electronic delivery medium; (ii) the type of required reports or other information that will be delivered electronically; (iii) the duration of the consents effectiveness (time period vs. infinite); (iv) and how to revoke the consent.

Can informed consent be given orally?

Yes. Consent can be obtained orally, provided a record of that consent is retained. This record should contain as much detail as any written consent, including whether the consent obtained is global and what electronic media will be used.

What types of information can an investment adviser send electronically?

Such information includes:

  • Investment adviser disclosure of, and client consent to, the assignment of an advisory contract.
  • Notice of a change in the members of an investment adviser’s general partner.
  • Investment adviser disclosure of, and client consent to, principal transactions.
  • Initial and annual delivery of an investment adviser’s brochure (e.g., Part 2A of Form ADV).
  • Investment adviser disclosure concerning, and client consent to, agency cross transactions.
  • Investment adviser disclosure relating to the custody of client assets.
  • Solicitor disclosure statements and client acknowledgments in connection with cash solicitation agreements.

Can an investment adviser disseminate marketing material electronically?

Yes. The use of electronic media to disseminate advertisements for an investment adviser’s services is permissible subject to the same requirements that apply to paper advertisements under Rule 206(4)-1.

 

Important Information

The information contained in this Frequently Asked Questions is only a summary and is not intended to be a comprehensive analysis of the rules and regulations applicable to registered investment advisers. It is not intended to constitute legal or compliance consulting advice or apply to any one investment adviser’s particular situation. For more information, please see our Terms of Use.

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