SEC Proposing to Permit the Release of Customer Contact Info. to Departing Reps

March 06, 2008

The U.S. Securities and Commission (“SEC”) released today a proposed rule amending Regulation S-P, which includes an exception from the privacy notice and opt-out requirements so as to permit the release of certain customer contact information to the customer’s representative when departing his or her current SEC registered investment adviser or broker-dealer and joining a new firm.

According to the text of the proposed amendments, this exception for releasing limited customer information to a departing representative is based upon the following conditions:

  • The information is limited to a customer’s name, a general description of the type of account and products held by the customer, and the customer’s contact information, including the customer’s address, telephone number, and email information;
  • The information does not include any customer’s account number, social security number, or security positions; and
  • The departing representative must provide the departing investment adviser or broker-dealer, no later than the representative’s separation date from employment with the departing investment adviser or broker-dealer, a written record of the information that will be disclosed pursuant to this exception, and the departing investment adviser or broker-dealer must maintain and preserve such records.

In the proposing rule release, the SEC clarified that a representative could use this information to solicit only a departing firm’s customers that were the representative’s clients. The SEC explained that “this condition recognizes that an investor might expect to be contacted by a representative with whom the investor has done business before, but not by another person at the representative’s new firm.”

Finally, the SEC noted that a registered investment adviser or broker-dealer “may not require or expect a representative from another firm to bring more information than necessary for the representative to solicit former clients.”

The SEC is seeking comments regarding the proposed rule. RIA Compliance Consultants will keep readers of our blog informed of the SEC’s final action related to this amendment.

Posted by Bryan Hill
Labels: Privacy, SEC