For years, many firms have treated recordkeeping as a storage problem. If the records existed and were somewhere in the system, the assumption was that the firm was covered.
That assumption is changing. In fact, over 100 firms have been charged with recordkeeping violations since December 2021, resulting in more than $2.2 billion in combined civil penalties. Most recently, in January 2025, the SEC settled with 12 major firms for $63.1 million in recordkeeping failures alone.
In recent exams and enforcement actions, regulators are asking different questions. They are not only asking whether records exist. They are asking whether firms can prove those records are complete, trustworthy, and supervised.
And for many organizations, that is becoming the real challenge.
From “Do You Have Records?” to “Can You Defend Them?”
Supervision requirements are not new. Neither is the expectation that firms retain books and records. What has shifted is the enforcement standard.
Regulators are increasingly focused on:
- Whether records are immutable, meaning non-rewriteable and non-erasable
- Whether all relevant channels are captured, not just email
- Whether supervision actually occurred
- Whether there is an audit trail showing who reviewed what and when
In other words, firms are no longer failing exams because they lack records. They are failing because they cannot demonstrate control over them. This is where many home-grown or basic cloud storage solutions fall short. They may retain data, but they rarely preserve the evidence regulators now expect to see.
This is critical because over 40% of FINRA’s enforcement fines in recent periods are specifically tied to supervision failures and not recordkeeping gaps, but the inability to demonstrate that a review happened.
The New Risk Is Not Policy Gaps. It Is Evidence Gaps.
Most firms today have reasonable policies. Where they struggle is in proving those policies are consistently executed.
Common breakdowns include:
- Records exist, but cannot be proven immutable
- Supervision was performed, but the review trail was not preserved
- Communications happened on personal devices or off-channel
- Vendors, not firms, control key records during exams
When those gaps surface during an exam, regulators often treat the situation very simply:
If the supervision cannot be demonstrated, they treat it as if it never occurred. This is not just a technology challenge. It is an operational defensibility challenge.
What “Supervisory Proof” Actually Means
Supervision is not just reviewing communications. It also preserves evidence that the review happened.
- A defensible records program typically includes:
- Non-rewriteable, non-erasable preservation
- Comprehensive and protected audit trails
- Exception reports that are retained
- Notes and resolutions tied directly to the record
- Documentation of escalations and outcomes
- Fast retrieval during exams
This allows firms to explain confidently:
- Here is what was reviewed.
- Here is when it was reviewed.
- Here is what was found.
- Here is how it was resolved.
That level of clarity significantly reduces exam risk.
Why Cloud Storage Alone Usually Is Not Enough
Moving records to the cloud improves storage and accessibility. It does not automatically solve compliance. Typical gaps in cloud-only systems include:
- Inability to prove immutability
- Missing or incomplete audit trails
- Lack of supervisory workflows
- Vendor dependence during exams
- Difficulty producing records quickly
This is one reason regulators have become skeptical of “vendor-managed compliance.” They increasingly expect firms, not vendors, to understand and control their own recordkeeping posture. The core question regulators are now asking looks more like this:
If your vendor disappeared tomorrow, could you still defend your records?
That is a very different standard from simply asking whether records are backed up somewhere.
Practical Questions Every Firm Should Be Asking
Whether you are an RIA, broker-dealer, bank, or hybrid firm, these questions are worth reviewing internally:
- Can we prove our records are immutable?
- Can we show that supervision actually occurred?
- Do we retain the evidence of review, not just the records themselves?
- Are off-channel communications addressed, or are they only prohibited?
- Could we retrieve records quickly if asked today?
- Do we rely entirely on our vendor during exams?
- Would our process stand up under scrutiny?
If several answers create uncertainty, it may be time to revisit the approach.
Where Purpose-Built Systems Help
Purpose-built archiving and supervision platforms are designed not only to store communications, but also to:
- Preserve supervisory history
- Centralize multi-channel capture across email, SMS, and social communications
- Create searchable audit trails
- Maintain firm-controlled retrieval access
- Streamline exam production
At Patrina, this is a primary reason firms work with us. The goal is not simply to check a box. The goal is to build processes that feel confident, organized, and defensible.
Financial communications now span more channels, more devices, and more systems than ever. Supervision must evolve accordingly.
Compliance is not just about having records.
It is about being able to stand behind them during an audit, an exam, or an investigation. As enforcement continues to shift toward proof, firms that treat recordkeeping as simple storage will remain exposed. Firms that treat recordkeeping as evidence management will be far better positioned.
If your team is evaluating whether your current approach can withstand scrutiny, or if you would like to walk through what a defensible supervision model looks like in practice, we are always happy to share what we are seeing across the industry.
Frequently Asked Questions (FAQs)
1. What do regulators mean by “proof of supervision”?
Proof of supervision means documented evidence that communications were actually reviewed, not merely stored. Regulators expect firms to demonstrate who reviewed what, when it was reviewed, what issues were identified, and how they were resolved, supported by immutable records and audit trails.
2. Is archiving alone still compliant with SEC and FINRA rules?
Archiving alone is no longer sufficient. While archiving satisfies basic retention requirements, regulators now expect firms to prove supervisory oversight, including preserved review history, exception handling, and defensible audit trails. Storage without evidence of supervision increases the risk of exam failure.
3. Why is immutability so important in recordkeeping?
Immutability ensures records are non-rewriteable and non-erasable, which protects their integrity. Regulators rely on immutability to confirm records have not been altered after the fact. Without it, firms may be unable to defend the authenticity of their records during an exam.
4. What types of records must firms supervise today?
Supervision now extends beyond email. Firms are expected to capture and supervise SMS/text messages, messaging apps, social media, collaboration tools, and other electronic communications, including those used on personal devices when applicable.
5. Why do firms fail exams even when records exist?
Most failures occur due to evidence gaps, not missing data. Firms may have records but lack:
- Preserved audit trails
- Proof that reviews occurred
- Documentation of exceptions and resolutions
When supervision cannot be demonstrated, regulators treat it as if it never happened.
6. Are cloud storage platforms compliant for supervision?
Standard cloud storage platforms are typically not designed for regulatory supervision. They often lack immutability controls, supervisory workflows, exception tracking, and exam-ready retrieval, making it difficult for firms to meet current enforcement standards.
7. What does a defensible supervision program include?
A defensible supervision program typically includes:
- Immutable record preservation
- Retained audit trails of reviews
- Documented notes, escalations, and resolutions
- Exception reports tied to specific records
- Fast, firm-controlled retrieval during exams
These elements allow firms to explain and defend their supervision process confidently.
8. Why do regulators expect firms—not vendors—to control records?
Regulators increasingly hold firms accountable for their own compliance posture. If a firm cannot access, retrieve, or explain its records without vendor involvement, that creates risk. The expectation is clear: firms must be able to defend their records independently.
9. How does a purpose-built supervision platform reduce exam risk?
Purpose-built platforms are designed to treat records as evidence, not just files. They centralize multi-channel capture, preserve supervisory history, maintain searchable audit trails, and streamline exam production—reducing uncertainty during regulatory reviews.
10. When should a firm reassess its current recordkeeping approach?
A reassessment is warranted if a firm cannot confidently answer:
- Can we prove supervision occurred?
- Can we retrieve records quickly today?
- Can we defend our process without relying on a vendor?
- If those answers are unclear, exam exposure is likely increasing.
