Mahi Sall, Advisor, Fintech-Bank Partnerships, Payments and Financial Inclusivity
January 25th, 2023
Mahi Sall is the CEO & Founder of FinXpair, a Berlin-based strategic advisory boutique firm focu[...]
The SEC Will Be Watching You…Every Text You Send
National Law Review | Matthew Lindenbaum, Robert Lindholm, Soren Young | Oct 17, 2022
Last week it was reported that the U.S. Securities and Exchange Commission’s recent investigation of broker-dealers for violation of regulations relating to use of personal messaging devices, such as WhatsApp—which resulted in over $1.8 billion in fines to 16 financial institutions—has broadened to include investment funds and advisers.
- The expansion of the SEC’s investigation comes on the heels of the SEC’s October 12, 2022 announcement of amendments to Rules 17a-4 and 18a-6 of the Securities Exchange Act relating to electronic recordkeeping and data production requirements for broker-dealers, security-based swap dealers, and major security-based swap participants.
See: IIROC to continue Client-Focused Reforms review with focus on KYC and suitability
The amendments will become effective 60 days after publication in the Federal Register. Broker-dealers will then have six months to bring their recordkeeping programs into compliance with the new rules.
- It is becoming rare for government investigations and civil litigation not to involve requests for text messages and other messaging apps.
- In an effort to comply with SEC and FINRA recordkeeping requirements, Wall Street banks frequently ban use of personal devices on trading floors and require traders to communicate with each other and with clients exclusively through email and bank-provided messaging programs, where messages can be monitored and preserved.
- Remote work habits:
- The rise of remote work during the pandemic made enforcing personal device bans challenging.
- Employees at many financial institutions are still working from home at least a few days a week. Communication habits built while working from home may follow employees as they return to the office.
See: New SEC task force will scrutinize ESG and climate disclosures and marketing
- So too has the challenge of speaking to customers who may prefer to use apps like WhatsApp that for many are an easier and more immediate way to communicate. When employees receive work-related messages on their personal phones, some companies now require them to take a picture of the message and forward it to compliance for preservation.
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