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← Series 79: Section 4
Series 79 practice questionmediumBooks and Records Requirements

An investment banking associate uses a personal text messaging application to discuss deal terms with a client, bypassing the firm's approved communication channels. Which regulatory concern does this conduct most directly implicate?

  1. AViolation of Regulation S-X financial statement formatting requirements
  2. BViolation of the Securities Act of 1933 registration requirements
  3. CViolation of Regulation NMS order handling rules
  4. DRule 17a-4 risk from unretained business messages✓ Correct answer
Explanation

Why D — Rule 17a-4 risk from unretained business messages

SEC Rule 17a-4 requires broker-dealers to preserve all business-related communications, including electronic messages. When employees use unapproved personal messaging platforms, the firm cannot capture, review, or retain those communications as required. This issue has been a major enforcement focus in recent years, with the SEC and FINRA imposing significant fines on firms whose employees conducted business through personal devices and off-channel communications platforms.

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