Communication Compliance in Financial Services

Telegram, beeper, handwritten letters, DM, instant message, text, email, group chat. There’s a long list of ways we have all found to communicate over the years. As technology evolves, there continues to be new methods of communication that provide an ideal experience to the people on each end of it.

Introduction

As these tech changes occur, compliance mandates amongst financial professionals is an inevitable need to protect all parties involved, both client and advisor. We get it, we’ve read the laws, it’s a lot to understand. Mobile phone usage, social media restrictions and other direct digital communication each have their own unique meticulous regulation adherence requiring advisors to fully comply or else there will be potential penalties.

Understanding the Regulations

So let’s break down what those regulations are, who is in charge and how to make sure your firm remains compliant. First let’s break the framework of regulations into two groups.

1. Digital Communication: These laws dictate the parameters within which financial services entities must operate in their digital interactions.
2. Supervision & Surveillance: These laws govern the internal mechanisms of firms, encompassing policies, audit trails, and internal monitoring to ensure compliance with regulatory standards.

Key Laws and Notices

Now that you have the categories, let’s break down the actual laws your firm will need to be aware of. Let’s discuss FINRA then SEC:

• FINRA Notice 10-06: This legislation mandates that your company will establish and implement protocols to oversee individuals who engage in business communication through social platforms. It also necessitates training for those utilizing these channels and emphasizes the importance of safeguarding investors from potential risks.
• FINRA Notice 07-59: This notice issued in June 2007, provides more details for guidance on how electronic communications will need to be reviewed by your firm.
• Securities & Exchange Act, Rule 17a-4(b)(4): Mandating the retention of all received and sent communications related to business activities for a minimum of three years, with the first two years readily accessible. Compliance entails storing electronic records securely in a non-erasable format.
• Commodities Future Trading Commission SEA 15 F (g) (1): This regulation focused on the trading of commodity futures, necessitating the retention of daily trading communications, spanning emails, instant messages, phone calls, and social media interactions, for the duration mandated by the commission.

Risks of Non-Compliance

Regulators are increasing disciplinary actions. Failure to comply with these and other regulations could result in:

• Adverse publicity
• Financial penalties
• Regulatory sanctions
• Harm to the reputation of your firm

Enforcement Measures

If you look back just in the last few years, it's evident that both the SEC and FINRA are deeply committed to enforcement measures. Several financial institutions encountered regulatory actions from these authorities due to their use of unauthorized communication platforms.

• FINRA's enforcement has focused on firms' supervision of communications and their ability to retrieve phone records. Many brokers and compliance officers faced monetary penalties and disciplinary measures imposed by FINRA as a consequence.
• The majority of SEC enforcement actions stemmed from broker-dealers and investment advisers maintaining inadequate documentation and utilizing unapproved communication channels.

Ensuring Compliance

Keep your firm compliant with a few rules:

• Assess the applicability of ALL relevant laws to your organization.
• Stay informed about the dynamic changes in these laws.
• Consider hiring compliance officers or consultants to navigate the complexities of compliance.
• Review your enterprise compliance solution to ensure it aligns with compliance standards across all communication channels.
• Review and update corporate policies and procedures regarding “bring your own device”.
• If you have several people at your firm, consider employee compliance training programs for new hires then regularly review their effectiveness.

CurrentClient: Your Compliance Solution

CurrentClient is a tool that is designed to keep your firm compliant with a focus on retaining and all communications between your clients. In addition, we make it easy to view the conversations as well by connecting to your favorite CRMs like Wealthbox and Redtail.

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