Financial Firms - Electronic Communications Compliance

 We knew it wouldn't be long before regulatory agencies began to exercise their enforcement powers. COVID isn't under control, but after over two years of the pandemic, we've mostly learned to live with it. However, when it comes to their efforts to ramp up Electronic Communications compliance, the authorities appear to be in general agreement. Beware of financial organisations that do not track their employees' messages across all platforms. The authorities are on their way to get you.

We already explored the developing storey of social media monitoring. There are murky waters there. There are still no guidelines in place. When it comes to posts made by and on behalf of their company, most organisations have appropriate control and compliance processes in place.


Current policies, on the other hand, are grossly inadequate when it comes to outlining what a broker can say and do with their personal accounts on social media. The Securities and Exchange Commission (SEC) and other regulators are now looking at anonymous accounts maintained by persons who don't clearly mention their employers. The SEC's recent $4 million fine against MML Investors Services, a MassMutual affiliate, implies that the agency is only getting started.

The sweep has begun.

The SEC had begun its sweep on Wall Street, according to Reuters on 12-October-2021. According to three anonymous sources, SEC enforcement investigators have lately contacted a number of banks. The check-ins were allegedly not social calls: the SEC appears to have started formally investigating how banks track employees' e-Communications, particularly on personal devices. The move exemplifies how, in this pandemic period, policies and compliance methods in response to those regulations are altering. It will be fascinating to see if these enquiries, and the sweep in general, turn into a full-fledged investigation.

Perhaps it's a forewarning that gives financial institutions some time to prepare for the impending attack. Compliance officers had their work cut out for them before COVID arrived, following e-Comms on work-approved devices and patrolling the trade floor. Those days, however, are long gone.


Another aspect of the equation is the preservation of those E-Comms' records. JP Morgan stated in August 2021 that it was in talks with regulators about attempts the multinational financial institution was doing to track and preserve conversations sent by their brokers using personal devices.

Currently, the Financial Industry Regulatory Authority and the Securities and Exchange Commission (SEC) mandate that all business-related correspondence be kept by broker-dealers. Part of the challenge is establishing the difference between personal and corporate communications, which is frequently confused. Compliance must be maintained by businesses. They must, however, be mindful of their employees' expectations on personal privacy. There will always be consequences when there is a lack of clarity regarding definition.

The rules are as follows:

About this time last year, two of Morgan Stanley's most senior commodities executives were fired (Autumn 2020). Despite a clear policy – but no law – forbidding them from doing so, both had been conversing about business topics over WhatsApp. Morgan Stanley executives believed that they should lead by example and uphold the firm's regulations, which are among the strictest in the business.

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