In recent years, regulated industries, particularly broker-dealer firms, have seen mounting regulatory scrutiny due to compliance failures concerning messaging apps. Firms like Wells Fargo and Morgan Stanley have been caught in this crossfire. The U.S. Securities and Exchange Commission (SEC) has not held back, recently announcing charges against 10 firms in their capacities as broker-dealers, and one dually registered broker-dealer and investment adviser.
The increasing regulatory oversight and subsequent charges highlight a widespread and longstanding failure by these firms and their employees to maintain and police electronic communications properly. The issue stems from neglecting to archive electronic correspondence, failure to issue policies and procedures, and overall lack of adequate supervisory oversight. This neglect has resulted in compliance slip-ups that regulators are not taking lightly.
In the midst of this increased scrutiny, there are crucial lessons that legal and compliance professionals can take away from these compliance hiccups. Firms regulated by bodies like the SEC must work with their internal teams to ensure that the proper archiving of electronic communications is not overlooked. The necessity of comprehensive policies and procedures that govern the use of electronic communication is increasingly becoming apparent. Further, this must be backed by a tight supervisory oversight structure to prevent compliance lapses.
All organizations, especially those in closely watched industries, should aggressively review their electronic communications policies, systems, and controls to evade falling foul of regulatory compliance standards. As regulators double down on scrutinizing messaging app usage and compliance, the risk of getting caught in non-compliance is a threat that firms and their legal teams must prepare to counter.
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