What a difference a year—and an election—can make. Just last fall, the Securities and Exchange Commission was hammering major brokerage firms with nine-figure fines for using unauthorized communication channels with clients. By January, the agency had completed its last sweep of enforcement actions in the crackdown—and then, silence.
Now, industry leaders are asking the SEC to take the opposite approach: ease up on some of the same recordkeeping and communication rules that fueled those penalties.
Last week, the Securities Industry and Financial Markets Association (SIFMA), representing broker-dealers, banks, and asset managers, formally petitioned the SEC to modernize its communication regulations. The group argued that outdated rules no longer reflect how financial professionals and clients actually communicate in today’s environment of real-time, mobile, and digital engagement.
In a public letter to SEC Chairman Paul Atkins, SIFMA said the current framework “no longer makes sense at a time when clients expect to connect instantly and informally with their financial professionals.” In an accompanying blog post, SIFMA CEO Kenneth Bentsen and Melissa MacGregor, the organization’s deputy general counsel and corporate secretary, wrote that “today’s SEC rules—designed for an era of paper files and limited technology—have not kept pace. Instead, they impose sweeping and often unworkable requirements that increase compliance costs without delivering commensurate benefits to investors.”
The Enforcement Era
During the Biden administration, the SEC made off-channel communications a top enforcement priority. Regulators pursued some of the biggest names on Wall Street, including Goldman Sachs and Morgan Stanley, over employees’ use of platforms such as WhatsApp and personal text messages. According to SIFMA, the sweep ultimately produced more than 90 settlements totaling over $2.2 billion in fines.
The SEC justified the massive penalties by arguing that lesser fines had failed to deter repeat violations. The agency maintained that without complete records of employee communications, regulators lack a clear view of firms’ activities, increasing the risk that potential misconduct goes undetected.
But critics—including SIFMA—countered that the enforcement campaign punished firms for technical failures rather than for conduct that harmed investors. “The settlements in the SEC’s off-channel communications cases starkly exposed the challenges of complying with existing communications retention requirements under federal securities laws,” SIFMA wrote in its letter to Atkins.
For many in the advisory and brokerage community, the takeaway from the past two years was clear: compliance expectations had become increasingly unrealistic. Firms had to deploy costly monitoring tools, prohibit widely used apps, and devote extensive resources to tracking even routine employee messages. The crackdown sent a chill through compliance departments, with firms fearful of inadvertent lapses that could lead to massive penalties.
SIFMA’s Proposal: Modernize the Rulebook
SIFMA’s letter to the SEC calls for a fundamental update to how communications are defined and retained. The group argues that the existing rules were written in a different technological era—one in which “written communications” meant paper correspondence and fax transmissions, not ephemeral text exchanges or social media interactions.
To bring the regulations in line with modern practices, SIFMA recommends several reforms:
1. Narrow the scope of required recordkeeping.
The trade group suggests excluding client-facing communications that have no connection to investment advice or securities transactions. That would free firms from the obligation to capture messages that are unrelated to the substance of advisory work—such as scheduling, logistics, or personal pleasantries.
2. Clarify the difference between meaningful records and trivial exchanges.
SIFMA emphasizes that many quick digital messages today—short texts, emojis, or brief acknowledgments—mirror what would once have been conveyed in a quick phone call. Those informal exchanges, the group argues, were never subject to recordkeeping requirements and shouldn’t be now simply because the medium has changed.
“Since then, communication has substantially moved away from paper toward email, text messaging, social media, and other electronic platforms,” the letter says. “Many of these interactions resemble what might have previously been a short phone call, and they do not constitute written advice or trade-related discussions.”
3. Establish a compliance safe harbor.
SIFMA proposes creating a safe harbor for firms that “implement and maintain reasonable policies and procedures” to manage electronic communications. The goal: provide clarity and protection for firms that act in good faith, reducing the risk of disproportionate enforcement for inadvertent recordkeeping failures.
4. Exempt immaterial communications.
Finally, the group calls for a categorical exemption for communications with no regulatory or investor-protection relevance—messages such as “Running late,” unsolicited inbound texts, or emoji reactions.
The Bigger Picture for Wealth Managers
For advisors and RIAs, this debate underscores a deeper challenge: how to balance compliance rigor with the realities of client communication in 2025. Today’s investors expect accessibility and immediacy. They text, use messaging apps, and share links on social platforms. Meanwhile, compliance frameworks still operate under assumptions born from the paper era.
For independent advisory firms, particularly those that have built client relationships on high-touch service, the SEC’s rigid recordkeeping expectations have been difficult to reconcile. Even well-intentioned communication—say, a quick text confirming a meeting—can trigger compliance concerns. Many RIAs have implemented strict policies banning certain apps or requiring messages to flow through approved archiving platforms, creating friction in client interactions.
SIFMA’s push to modernize the rules could have meaningful implications beyond the wirehouse world. If the SEC embraces the idea of limiting the scope of “business-related communications,” smaller advisory firms could gain flexibility to engage clients where they already are—on their phones, through text or secure messaging—without fear of triggering enforcement risk.
Still, even if reforms are adopted, RIAs will need to maintain clear documentation standards and technology oversight. Regulators have repeatedly signaled that communications tied to investment recommendations, trade discussions, or account management must remain fully recorded and auditable. The issue, then, is not whether oversight exists—but whether it’s proportional and feasible.
A Shift in Regulatory Tone
Whether SIFMA’s recommendations gain traction depends heavily on the current leadership at the SEC. Paul Atkins, the recently appointed chairman, is widely viewed as skeptical of heavy-handed corporate penalties and supportive of a more pragmatic approach to regulation. During his earlier tenure as a commissioner, Atkins frequently criticized broad enforcement actions that he said penalized compliance missteps rather than investor harm.
Since taking the helm, Atkins has already paused several pending rulemakings and enforcement proceedings. He’s also emphasized refocusing the agency’s limited resources on fraud and misconduct that directly harm investors—rather than on what he’s described as “process violations.”
That shift in tone has not gone unnoticed across the advisory and brokerage industry. According to data compiled by one major law firm, enforcement actions have dropped sharply since Atkins assumed leadership, suggesting the SEC is recalibrating its approach.
In its letter, SIFMA seized on that opening, arguing that the communications issue represents an opportunity for the SEC to realign its rules with technological and practical realities. “Our goal is to ensure the regulatory framework protects investors without imposing unnecessary burdens that hinder effective communication between firms and their clients,” the group wrote.
The Road Ahead
Still, it’s unclear how quickly—or even whether—the SEC will act on the proposal. The agency’s operations are currently constrained by a government funding impasse, which has limited its ability to respond publicly. “During the shutdown, the SEC’s public affairs office is not able to respond to many inquiries from the press,” a spokesman said in a brief statement.
Even once normal operations resume, rulemaking at the SEC is a lengthy process, often involving public comment, cost-benefit analysis, and multiple rounds of internal review. It could be months before any formal proposal appears on the regulatory agenda.
In the meantime, advisory firms and broker-dealers will likely continue to face uncertainty about how far enforcement risk extends in the post-crackdown era. Some compliance officers have advised continuing to operate under the stricter interpretations of recent years until the SEC formally signals otherwise. Others see Atkins’ leadership as a green light to revisit policies that may have been overly restrictive or costly.
For RIAs, this moment presents both risk and opportunity. The risk lies in assuming that enforcement leniency equals deregulation—it doesn’t. Recordkeeping rules remain in force, and failure to document advice-related communications can still expose firms to serious penalties. But the opportunity lies in shaping how those rules evolve.
Advisory industry advocates have long argued that modern compliance should focus on investor outcomes, not the mechanics of message capture. If the SEC takes that view, future regulation could strike a better balance—protecting investors while acknowledging the realities of digital communication and client engagement.
In many ways, the communications debate mirrors the broader evolution of wealth management itself. The industry is moving toward flexibility, personalization, and technology-driven service. Regulators, too, are being challenged to modernize—to distinguish between rules that safeguard investors and those that simply preserve legacy processes.
A year ago, few would have predicted that the SEC would face pressure from Wall Street to loosen communication oversight. But as digital engagement continues to define how advisors connect with clients, the conversation is shifting from punishment to practicality. The next chapter will reveal whether the SEC is willing to rewrite its rulebook for the modern era—or continue enforcing a framework designed for a world of paper memos and landline calls.
