As the landscape of communication continues to evolve in our increasingly digital world, the financial services industry is feeling the pinch of regulatory scrutiny. In recent years, financial firms have faced nearly $2 billion in penalties from the SEC and CFTC due to unregulated “off-channel” messaging. This surge in “off-channel” communication, including usage of platforms such as WhatsApp, WeChat, SMS, LINE, and mobile calls, is largely fueled by the rise of hybrid work. Yet, regulators maintain that all business communications must be monitored, auditable, and occur only within official channels. In the words of SEC Chair Gary Gensler, “As technology changes, it’s even more important that registrants appropriately conduct their communications about business matters within only official channels. And they must maintain and preserve those communications.”
Unlocking New Channels:
Transformation through compliant communication
Communicating with customers via their preferred channels doesn’t need to be a compliance risk. In fact, it can be an opportunity to differentiate your service and transform your business.
Platforms like WhatsApp, WeChat or standard text messages are easy, efficient and powerful methods of communication. That is why asset managers, wealth managers, brokers and other front-office professionals use them. The same is true for back office and internal teams. People always want ease of efficiency in their business lives.
As we’re all seeing, this era of remote work has blurred the line between personal and professional communication. With these changes, many apps have become common tools for many companies, both internally and externally. Clearly, this has made things easier for thousands of employees.
Unfortunately for the global finance community, this also creates significant compliance risk.
Non-approved Communication Tools
Market regulations such as FINRA’s Advisers Act Rule 204-2 create a recordkeeping obligation for investment advisers. Similarly, SEC Rule 17a-4(b)(4) demands the retention of all broker-dealer business communications for a period of three years. This includes e-mail and all “other” electronic communication, such as mobile messaging apps.
As a result of these rules, most firms strictly prohibit employees from using personal email, texting, WhatsApp, WeChat or social media for business purposes. As external systems, those communications cannot be easily monitored and recorded by industry firms.
Yet the reality is that global events have accelerated the movement of work beyond the four walls of the office. Specifically, the explosion of text messaging as a preferred medium has blurred the professional and personal boundaries that had previously prevailed. It’s easy to see how some members of the financial community adopted non-approved communication tools for the sake of convenience and accessibility. But that does not make it acceptable. Indeed, this communication trend has not gone unnoticed by regulators.
Reuters recently reported that the SEC has been conducting inquiries to ensure financial institutions are adequately monitoring and recording work-related messages. Penalties have already been levied on several major institutions. FINRA and the CFTC have both stated that they are paying particular attention to employee usage of personal devices.
This heightened scrutiny is triggering a variety of responses from financial institutions – from policy tightening and reinforcement to the resurrection of past technology approaches like corporate-issued mobile devices. Unfortunately most of these solutions don’t address the root problem – clients will communicate with their counterparties on their preferred channels and telling customers ‘no’ generally isn’t good for business.
At Symphony, we see an opportunity for financial institution employees to not only connect with clients on these preferred channels but to connect these conversations into their firm’s broader engagement and automation strategies – making their organization not only safer, but smarter too.
Symphony has always offered compliant messaging and open APIs as part of our platform. But we also have a solution for users who want to connect with clients, counterparties and colleagues through their preferred channels. Our integrations with WhatsApp, WeChat, and standard texting now enable firms to seamlessly meet their record keeping obligation, as well as satisfy their larger compliance requirements. This includes real-time monitoring for cautionary expressions, as well as locating and retrieving past conversations.
All of this happens within the existing Symphony compliance feed so there is no additional cost or headache for existing Symphony customers to onboard a new source of data, as is often the case elsewhere. By making it simple, our solution allows compliance departments to authorize employee and customer communication, while always maintaining regulatory responsibility.
Every professional knows that relationship-building and sales growth are directly impacted by friction here. Removing these obstacles enables organic expansion of those important customer contacts. Through API connectivity, we can also unlock the external platforms you need to create workflow automations internally. Imagine a world where your salespeople can start a WhatsApp conversation with your client directly within your trading platform, share relevant research or other content automatically in that conversation, and then see insights from that conversation captured automatically in your CRM. This translates into more efficient service for customers and time savings for your firm.
There is a balancing act that every firm in our industry must perform. This pertains to driving client engagement digitally, while honoring long-standing regulatory obligations in capturing and retaining communication. Unfortunately, recent fines and executive dismissals have shown how hard that is without the right approach and toolset.
Symphony’s approach resolves this conundrum. Integrating popular external platforms helps client-facing teams be more effective while enabling risk management departments and compliance officers to meet their regulatory responsibilities.
Omnichannel & Federated
The ability to traverse channels and communities without friction creates “omnichannel” workflows – a core tenet of our strategy at Symphony and one I wrote more broadly about recently. Our Federated solutions for WhatsApp, WeChat, and standard texting are a key pillar of that strategy.
When technology can foster this dynamic, it creates more than just productivity or efficiency. It creates a sense of community and connectedness. Ultimately, that is the foundation of a networked market infrastructure. Symphony creates these omnichannel workflows across our industry by connecting communication technologies.
Symphony understands that communication is not really about technology. It’s about making people more effective in their roles – especially in our market. That means both individually and as part of a larger group.
Regardless of modes and mediums, Symphony’s role is to facilitate this. It’s true that different people prefer different platforms. That sounds like a technology issue. But it’s deeper than that. It’s about connectivity as a driver of trust. And trust is always the root of business.
Tech tools are merely the facilitator of that human dynamic. Of course the technology matters. But only because trust arises from all the complexity under the hood. When done properly, the results are omnichannel workflows across an entire industry.
As we know, our business is going through massive change. That evolution becomes faster and more extreme each year. Our CEO, Brad Levy, discusses this at length in his latest blog: “Risk, Transformation & Trust.”
As today’s world of work evolves, communication will be more important than ever. Traditional approaches to compliance in an increasingly decentralized and flexible environment will no longer be enough. The truth is that companies and customers will always want things to be easier. Regardless of how the world of work may change, that part will not.
Symphony’s technology will continue to model the way forward during these transformative times. This is not just our philosophy. It is our responsibility to over half a million Financial Service professionals. And it is one that we take seriously.
To learn more, visit symphony.com/federated
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