Wealth managers on alert after WhatsApp raid on banks | Panda Anku

Wealth managers are tightening controls on face-to-face communication tools like WhatsApp while joining banks to ensure staff are sticking to the rules when doing business with clients remotely.

Regulators had already begun cracking down on the use of unauthorized messaging tools to discuss potentially market-moving matters, but the issue gained urgency as the 2020 pandemic forced more financial workers to work from home.

Most of the companies implicated in communications and record keeping investigations by the U.S. Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) were banks — all of which were fined or more than $1 billion in total Official penalties have been deferred.

But fund companies with assets in the billions are also increasingly examining how employees and customers interact.

“It’s the hottest topic in the industry right now,” said a Deals banker, who declined to be named in accordance with his employer’s rules on speaking to the media.

Reuters reported last year that the SEC is investigating whether Wall Street banks adequately documented employees’ work-related communications, and JPMorgan was fined $200 million in December for “widespread” errors.

German wealth manager DWS announced last month that it had set aside 12 million euros ($12 million) to cover potential US fines related to investigations into its employees’ use of unauthorized devices and record-keeping obligations, bucking a host of banks joins that make similar determinations, including Bank of America, Morgan Stanley and Credit Suisse.

Sources from several other investment firms – described as the “buy-side” in the financial world – including Amundi, AXA Investment Management, BNP Paribas Asset Management and JPMorgan Asset Management, told Reuters that they used tools to manage all communications between employees and maintain customers compliant.

SEC and CFTC spokesmen declined to comment on whether their investigations could extend beyond the banks, but industry sources expect the authorities to continue to cast their nets across the financial industry and even the government.

Last month, the UK’s Information Commissioner’s Office (ICO), the country’s top data protection authority, called for an investigation into government officials’ use of WhatsApp, personal email and other messaging apps after an investigation found “inadequate data security” during the pandemic .

A good deal for some

Financial institution regulations have gradually tightened since the 2007-2009 global financial crisis, and companies have long recorded their employees’ communications to and from office phones.

This practice is designed to deter and detect violations such as insider trading and front-running or trading in non-public information, and to ensure best practice in dealing with customers.

But with thousands of finance workers and their clients still working remotely after leaving corporate offices at the start of the pandemic, some sensitive conversations that should be recorded remain at risk of being inadvertently conducted through informal or unauthorized channels .

Brad Levy, CEO of business messaging software company Symphony, said concerns about managing this risk have led to a surge in interest in software upgrades that make conversations on popular messaging tools, including Meta Platforms’ WhatsApp, recordable.

“Most believe that the deeper you go, the broader the breadth of these investigations,” Levy said.

“Many market participants have retention and monitoring requirements and as such are likely to have an opinion, including a more proactive approach, without being a direct target.”

He said Symphony’s user base has more than doubled to 600,000 since the pandemic, including 1,000 financial institutions including JPMorgan and Goldman Sachs.

Symphony peer Movius also said its businesses, which specialize in making WhatsApp and other tools writable, have more than doubled in a year, with sales to wealth managers a growing component.

“Many on the buy-side are realizing that you can’t just rely on SMS and voice calls,” said Movius Chief Executive Ananth Siva, adding that the company is also committed to working with other highly regulated industries, including healthcare. aspire

The Movius software integrates third-party communication tools like email, Zoom, Microsoft Teams and WhatsApp into a system that can be recorded and archived as needed, he said.

Amundi, AXA IM, BNPP AM and JPMorgan Asset Management all confirmed that they had launched the Symphony software but declined to comment on the full breadth of the services they use or the timing of their launch.

Amundi and AXA IM both confirmed they use Symphony services for team communications, while AXA IM also said they use them for market intelligence.

Amundi, BNPP AM and JP Morgan AM declined to comment on whether they thought regulators would seek to investigate record keeping at asset managers after enforcement action against the banks was complete.

A spokesman for BNPP AM said it has banned the use of WhatsApp for customer communications due to compliance, legal and risk considerations, including the General Data Protection Regulation (GDPR).

($1 = 0.9872 euros)


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