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Asset Managers, Banks Are Tightening Controls of Communication Tools like WhatsApp

CNBC via Reuters | Aug 19, 2022

Social media apps on phone - Asset Managers, Banks Are Tightening Controls of Communication Tools like WhatsAppProactively Clamping Down

Asset managers are tightening controls on personal communication tools such as WhatsApp as they join banks in trying to ensure employees play by the rules when they do business with clients remotely.

  • Regulators had already begun to clamp down on the use of unauthorized messaging tools to discuss potentially market-moving matters, but the issue gathered urgency when the pandemic forced more finance staff to work from home in 2020.

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  • Reuters reported last year the SEC was looking into whether Wall Street banks had adequately documented employees’ work-related communications, and JPMorgan was fined $200 million in December for “widespread” failures.
  • Last month Britain’s Information Commissioner’s Office (ICO), the country’s top data protection watchdog, called for a review of the use of WhatsApp, private emails and other messaging apps by government officials after an investigation found “inadequate data security” during the pandemic.
  • Most of the companies caught in communications and record-keeping probes by the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) have been banks - which have collectively been fined or have set aside more than $1 billion to cover regulatory penalties.
  • But fund firms with billions of dollars in assets are also increasing their scrutiny of how staff and clients interact.

One Banker says:

It is the hottest topic in the industry right now.

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Proactive Market Response

  • He said Symphony’s user base has more than doubled since the pandemic to 600,000, spannin 1,000 financial institutions including JPMorgan and Goldman Sachs.
  • Symphony peer Movius also said its business lines specializing in making WhatsApp and other tools recordable have more than doubled in size in the space of a year, with sales to asset managers a growing component.  “Many on the buy-side have recognized that you can’t just rely on SMS and voice calls,” said Movius Chief Executive Ananth Siva.

“Many markets participants have retention and surveillance requirements so are likely to take a view, including being more proactive without being a direct target.”

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