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News July 30, 2012 Issue

Do Advisers Need Email Disclaimers?

Should your clients be reminded that the SEC could examine you at any moment?

Or should your clients be reminded that anything they say – anywhere – can and very likely will be used against them?

Is either responsibility yours in the first place?

The subject is email disclaimers, and the question is whether or not your firm needs one.

Email notices are commonly included in electronic communications and often respond to some potential legal risk. Typically, the notice is a privilege claim, a privacy disclaimer, or even a plea to recycle the message if you print it out.

"This electronic communication is privileged and confidential and is intended for the exclusive use of the intended recipient(s)…"

"The unauthorized interception, storage, copying, use, or distribution of this e-mail, including attachments, is prohibited and may be unlawful..."

"To ensure compliance with IRS requirements, we inform you that any U.S. federal tax advice contained in this communication is not intended or written to be

used, and cannot be used by any taxpayer, for the purpose of avoiding any federal tax penalties…"

"Please consider the planet before you print this message, and please recycle it if you do…"

As email has become embedded in our everyday personal and professional lives however, and as the law has developed around it, a wider variety of notices are cropping up.

Now, similar to the automated telephone warning, "this line may be monitored or recorded," advisers are calling attention to the fact that someone else besides the message recipient may eventually read their communications.

"Recipients should be aware that all emails exchanged with the sender are automatically archived and may be accessed at any time by duly authorized persons and may be produced to other parties, including public authorities, in compliance with applicable laws," for example.

Is there an obligation to disclose?

Advisers do not have the formal email review or recordkeeping requirements of broker dealers. Responsibilities related to other adviser compliance requirements however, have made email surveillance and archiving a necessity.

As a fiduciary, is notice language like this prudent to warn clients that a supervisor, the SEC, or even opposing counsel may be watching?

Or is it unnecessary disclosure creep, and clients should know better in the first place?

When we ran this by a few lawyers in the know, we got some definite feedback.

"Yikes!" was our favorite reaction. When we asked why, the lawyer said that a notice like that would surely "freak clients out."

Well, that may be the whole point.

Another attorney said they see it most commonly in the wealth management arena. Clients will use a business email address to elaborate on personal issues related to themselves or their spouse or talk about the need to move money during a divorce proceeding, for example, all of which can be discoverable in a litigation.

There is "tremendous variety" in the disclaimers, said the lawyer, who has helped a number of advisers craft them. The disclaimers can act as a reminder that the adviser is a regulated entity subject to examination and that emails are a part of the firm’s business records. The disclaimers also often respond to specific concerns about the potential to receive subpoenas related to private litigation.

It isn’t something to adopt across the board, said the lawyer, but individual advisers in the high net worth/financial planning sector may want to consider it.