SEC opens inquiry into how Wall Street banks keep tabs on employees’ work-related communication – including on their personal devices
- SEC is conducting industry ‘sweep’ on communication policies, sources say
- Agency seeks confirmation that banks are documenting work communications
- Enforcement boss last week expressed concerns about use of personal devices
- Private communications may hamper investigations into financial crimes
- Pandemic and remote work have raised new compliance challenges for firms
The U.S. Securities and Exchange Commission has opened a broad inquiry into how Wall Street banks are keeping track of employees’ digital communications, according to a new report.
SEC enforcement staff contacted multiple banks in recent weeks to check whether they have been adequately documenting employees’ work-related communications, such as text messages and emails, with a focus on their personal devices, three people familiar with the matter told Reuters.
The industry ‘sweep’ is a further sign that the SEC is ramping up enforcement under its Democratic leadership, and highlights the challenges Wall Street banks face keeping track of staff communications in the work-from-home pandemic era.
An SEC spokesman declined to comment on the reported sweep when reached by DailyMail.com on Tuesday.
Traders work on the floor of the New York Stock Exchange (NYSE) in New York on Tuesday. The SEC has opened a broad inquiry into how Wall Street banks are keeping track of employees’ digital communications
The SEC periodically conducts sweeps to quickly gather information on issues it suspects may be widespread. Sweeps can sometimes, although not necessarily, lead to formal probes.
The sweep appears to stem from a probe the agency has been conducting for some time into an individual financial institution, two of the sources said, without naming the firm.
In August, JPMorgan Chase & Co disclosed that it had been fielding regulatory inquiries concerning its ‘compliance with records preservation requirements in connection with business communications sent over electronic messaging channels’ that the bank had not approved.
It said it was discussing a ‘resolution’ with regulators, without specifying which ones.
Spokespeople for the SEC and JPMorgan declined to comment.
The SEC and the Financial Industry Regulatory Authority, Wall Street’s self-regulatory body, require broker-dealers to keep records of all business-related communications.
Regulators are concerned with communications on apps such as WhatsApp that a company may not be able to provide in response to an investigation
Banks have to walk a fine line to comply with those requirements without infringing upon employees’ privacy, said one of the sources.
In the United States, there is no clear-cut legal basis on which an employer can demand to inspect employees’ personal communications, while in other countries doing so may breach data protection statutes, the source said.
As a result, many financial firms ban the use of personal email, texts and other social media channels for work purposes, but keeping up with a proliferation of communication apps — especially during the pandemic — is a challenge for companies.
In a speech last week, the SEC’s head of enforcement Gurbir Grewal warned that institutions should stay on top of the many ‘issues raised by the increased use of personal devices, new communications channels, and other technological developments.’
The SEC’s head of enforcement Gurbir Grewal recently warned that financial institutions should stay on top of the many ‘issues raised by the increased use of personal devices’
‘Recordkeeping violations may not grab the headlines, but the underlying obligations are essential to market integrity and enforcement,’ said Grewal.
‘I am certain many in this room have sent or received professional communications on personal devices or unofficial communications channels,’ he added, addressing a broker/dealer compliance conference in Washington DC.
‘You need to be actively thinking about and addressing the many compliance issues raised by the increased use of personal devices, new communications channels, and other technological developments like ephemeral apps.’
Failure to retain and produce communication records can impede regulatory investigations, Grewal said in the remarks.
Last year, Morgan Stanley fired two top executives due to the unauthorized use of WhatsApp to discuss work matters.