In regulatory affairs, recent action signals an emerging trend that legal teams across the globe must consider carefully. The SEC and FINRA, for instance, have long been attentive to so-called “off-channel” communication issues. These problematic communication practices, some several years in the making, involve brokers-dealers and investment advisers using social media applications and messaging services. Some popular platforms implicated are WhatsApp, WeChat, Facebook, and Slack. All have been used for business-related communications.
These recent developments can be traced back to a significant regulatory move announced by the SEC and FINRA. Problems arose due to insufficient record-keeping on these various off-channel platforms, hence making them a considerable challenge in the regulatory landscape.
Specifically, the term “off-channel” refers to the use of communication platforms outside the typical methods used within investment advisory and broker-dealer industries. These non-traditional communication platforms have been found to play a significant role in these sectors, hence the heightened scrutiny from regulators.
An example of this increased focus is the record-setting windfall announced by regulators, representing the first enforcement action of its kind over off-channel communications. The case serves as a stark warning for broker-dealers and investment advisers who use these unconventional communication methods for business-related purposes.
However, it is important to note that the legal landscape is not all doom and gloom in this area. Proactive steps can be taken to mitigate risk. Equipped with an awareness of the potential legal ramifications of off-channel communications, diligent companies and their legal advisors can implement strategies to ensure compliance with record-keeping rules.
For more in-depth scrutiny of these events, click here to view the original article from Carlton Fields.