WhatsApp Crackdown: US Financial Firms Planning To Monitor Staff Video Calls Over Violations
As the nature of work evolves rapidly, finance firms are urged to adapt and ensure they are well informed about the new risks associated with video communication in regulated environments.
In response to heightened scrutiny over communication channels like text messages and emails, financial firms are increasingly considering the necessity of monitoring staff video calls for potential regulatory violations. This concern stems from expectations that regulators may extend their oversight to include these video communications, aiming to identify compliance breaches.
The US Securities and Exchange Commission (SEC) has spearheaded a broader industry crackdown, primarily focusing on business-related text messages sent over unauthorised platforms like WhatsApp, which were untracked and unrecorded by regulated firms during the COVID-19 pandemic when remote work was prevalent, reported Reuters.
While the SEC has refrained from commenting on this matter, as per Reuters, individuals with knowledge of US investor probes express apprehension that the SEC might broaden recording requirements to encompass Zoom calls and similar forms of communication.
To ensure compliance with record-keeping obligations and mitigate risks related to potential unauthorised sharing of non-public information during video calls, financial institutions are now enlisting the expertise of technology specialists, law firms, and risk consultants. These efforts involve monitoring and retaining video calls as necessary.
This regulatory enforcement coincides with intensified initiatives by both US and UK regulators to enhance protections for retail investors, particularly concerning the recent phenomenon of meme stocks, as more individuals invest their savings in financial markets.
Brad Levy, CEO of Symphony, a market infrastructure, and tech firm with clients such as JP Morgan and Goldman Sachs, remarked on the challenges of integrating video into a highly regulated work environment, highlighting the current lack of formal record-keeping requirements for video calls, which are widely considered as substitutes for face-to-face meetings.
Matthew Nunan, a partner at law firm Gibson, Dunn & Crutcher, anticipates regulators will likely assess potential compliance failures occurring over video calls, emphasising the necessity for firms to effectively record, retain, and produce pertinent business records, regardless of the communication medium.
Sarah Pritchard, executive director for markets at Britain's Financial Conduct Authority, emphasised their focus on market abuse and the mechanisms facilitating such activities, indicating a heightened vigilance towards potential compliance violations, especially with the historical evidence of wrongdoings through work-related email and chatrooms.
As the nature of work evolves rapidly, finance firms are urged to adapt and ensure they are well informed about the new risks associated with video communication in regulated environments, according to Claire Garrett, head of the financial institutions practice at Marsh.
Multiple sources reveal that at least two major global banks have initiated the recording of Zoom calls, a precautionary measure to potentially review content later if necessary. Additionally, HSBC is reported to restrict staff from sending texts using their work phones, while Microsoft emphasises compliance by offering recording options for capturing calls as required by industry regulations.
The US Financial Industry Regulatory Authority (FINRA) enforces the 'FINRA Taping Rule 3170', obliging certain firms to tape-record all telephone conversations between registered persons and customers for a minimum of three years to prevent improper practices in the sale or marketing of financial products.
Amidst the evolving landscape of communication technologies, regulators and industry experts recognise the unique risks posed by video calls. Technology solutions to efficiently screen video calls for compliance are not yet widely adopted, raising concerns about potential exchanges of non-public information that may not be captured through audio recordings.
Overall, the industry remains vigilant, anticipating potential expansions in regulatory reach as technology continues to advance. The SEC's substantial fines for communication compliance missteps and ongoing probes into breaches among investment advisors further emphasise the industry's commitment to regulatory compliance and adherence to evolving standards.
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