“Off-channel communications are an SEC exam priority for 2023. The Financial Industry Regulatory Authority‘s biggest fine category last year was books and records, in which offenses included failure to supervise the use and preservation of business-related emails and texts.”
– Melanie Waddell, Washington Bureau Chief, Investment Advisory Group
This week, explore how to prevent communication overload in the workplace by determining which platform to use and when. Consider the factors contributing to the compliance industry’s future growth. Learn what to consider and the importance of finding the right communications compliance technology partner. Finally, get a lawyer’s perspective explaining the SEC’s sweep of adviser’s texts and what firms can expect.
Communication 3.0- The Best Ways To Engage
In today’s world of work, communication is essential for success, but it’s not just about making eye contact or listening closely. With many communication platforms available, it’s easy to waste time cycling through them to see who said what. As more people work from home, electronic communication is becoming the primary way to connect, but knowing which platform people use and are willing to engage on is crucial. Choosing and communicating that choice is an essential skill to prevent communication overload. For example, a senior operations manager discovered that asking clients to use her work email exclusively improved communication and reduced chaos.
Three Graphs Explain the Compliance Industry’s Growth
The compliance profession has a promising future due to the growth in the global population and money supply, which creates more risks. As more money is needed to meet the needs of new people, it also brings more kleptocrats, financial scandals, and cash sloshing around offshore, leading to more regulations globally, including in the US, where the federal regulatory response has increased by 1,750 percent since 1950. With nearly 8 billion people and a projected 10.4 billion by the end of the century, the compliance profession is needed to keep track of new and old regulations and help others comply with them. Additionally, the growing global middle class further fuels the cycle of more money supply and regulation.
Future-Proofing Compliance: The Importance of Finding the Right Communications Compliance Technology Partner
Financial services firms face increased regulatory scrutiny due to economic, environmental, and political pressures and the industry’s response to these challenges. As a result, communications compliance is one of the top areas of concern, and regulators are expected to focus on communications surveillance in 2023. Failure to capture all communication data can result in regulatory fines and legal action. The right technology partner can support communications compliance across three dimensions: real-time communications surveillance, AI-powered risk scoring and detection, and an easy-to-search archive for auditing and investigative purposes. The path forward for communication surveillance lies in technology that monitors communications as they’re written, AI-powered risk scoring and detection, and an easy-to-search archive for auditing and investigative purposes.
Lawyer Breaks Down SEC’s Sweep of Advisors’ Texts
The SEC’s focus on advisors’ off-channel communications, including text messages, means more firms can expect to receive inquiries about record retention. The SEC’s authority to enforce business communication retention comes from Section 17(a)(1) of the Securities Exchange Act of 1934 and Section 204 of the Investment Advisers Act of 1940. The agency expects firms to develop policies and procedures that comply with the rules. However, regulators will respect competing employee interests and employment laws to a certain extent. The SEC has not defined “business-related” regarding off-channel communications. Rule 17a-4 applies to communications relating to a broker-dealer’s “business as such,” while Rule 204-2 requires preserving an investment advisor’s communications relating to “advice given or proposed,” among others. The SEC has interpreted these rules broadly, increasing flexibility in future enforcement actions.
