Asset managers are tightening controls on personal communication tools like WhatsApp as they join banks in trying to ensure employees play by the rules when they do business with customers remotely.
Regulators began cracking down on the use of unauthorized messaging tools to discuss potentially moving matters in the market, but the issue escalated when the pandemic forced more finance workers to work from home in 2020. Compelled to.
Most of the companies caught in communications and record-keeping investigations by the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) are banks — which have been fined collectively or more than $1 billion (approximately) separately. 8,000 crore) to cover regulatory penalties.
But fund companies with billions of dollars in assets are also scrutinizing how employees and customers interact.
“This is the hottest topic in the industry at the moment,” said one deal banker, who declined to be named in keeping with his employer’s rules when he spoke to the media.
Reuters reported last year that the SEC was looking into whether Wall Street banks adequately documented employees’ work-related communications, and awarded JPMorgan $200 for “extensive” failures in December. million was fined.
German asset manager DWS said last month that it had set aside 12 million euros (about Rs 100 crore) to cover potential US fines linked to an investigation into the use of unapproved equipment and record-keeping requirements by its employees. Equals had joined a host of banks. Provisions, which include Bank of America, Morgan Stanley and Credit Suisse.
Sources at several other investment firms – described in the financial community as ‘buy-sides’ – including Amundi, AXA Investment Management, BNP Paribas Asset Management and JPMorgan Asset Management, told Reuters that they decided to keep all communications between employees. The equipment is deployed for and tailored to the customers.
Spokespersons for the SEC and CFTC declined to comment on whether their investigation could extend beyond banks, but industry sources expect officials to spread their net across the finance industry and even government. .
Last month the UK Information Commissioner’s Office (ICO), the country’s top data security watchdog, called for a review of the use of WhatsApp, private email and other messaging apps by government officials after it was found to have “inadequate data protection” during the pandemic. .
good business for some
Regulations governing financial institutions have been progressively tightened since the global financial crisis of 2007–9, and companies have long recorded employee communications from office phones.
This practice is designed to prevent and uncover breaches such as insider trading and “front-running”, or trading on information that is not yet public, as well as to ensure best practice in terms of treatment of clients has been designed.
But with thousands of finance employees and their clients working remotely even after being away from company offices at the start of the pandemic, some sensitive conversations that must be recorded run the risk of being inadvertently conducted on informal or unauthorized channels. lives.
Brad Levy, CEO of business messaging software firm Symphony, said concerns over managing the risk have led to increased interest for software upgrades that make conversations recordable on popular messaging tools, including the meta platform’s WhatsApp.
“Most people believe that as they go deeper, the scope of these investigations will increase,” Levy said.
“Many market participants have retention and monitoring requirements, so those without a direct target are likely to take a look, including being more proactive.”
He said Symphony’s user base has more than doubled to 600,000 since the pandemic spread to 1,000 financial institutions, including JP Morgan and Goldman Sachs.
Symphony peer Movius also said that its business lines specializing in making WhatsApp and other devices recordable have more than doubled in size in the span of a year, with sales to property managers being a growing component.
Movius chief executive Anant Siva said, “Many buyers have recognized that you cannot rely only on SMS and voice calls.” The company was also seeking to work with other highly-regulated industries, including healthcare.
He added that the Movius software integrates third-party communication tools such as email, Zoom, Microsoft Teams and WhatsApp into a system that can be recorded and stored as needed.
Amundi, AXA IM, BNPP AM and JPMorgan Asset Management all confirmed that they have adopted the Symphony software, but declined to comment on the full breadth of services they used or when these were rolled out. refused.
Amundi and AXA IM both confirmed that they used Symphony Services for team communication, while AXA IM also stated that they used it for market information.
Amundi, BNPP AM, and JPMorgan AM declined to comment on whether they thought regulators might want to investigate record-keeping on asset managers after enforcement actions against banks are completed.
A spokesperson for BNPP AM said it had banned the use of WhatsApp for client communications due to compliance, legal and risk considerations, including the General Data Protection Regulation (GDPR).
© Thomson Reuters 2022