Together with banks, asset managers are strengthening controls on personal communication technologies such as WhatsApp (NASDAQ:META) to ensure that workers follow the rules when conducting distant business with clients.
Regulators had already begun to crack down on the use of unauthorized messaging platforms to discuss potentially market-moving items before the pandemic of 2020 drove more finance employees to work from home.
The majority of companies caught in communications and record-keeping investigations by the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) have been banks, which collectively have been fined or set aside more than $1 billion to cover regulatory penalties.
However, fund companies with billions of dollars in assets are also boosting their inspection of the interactions between employees and clients. It is the hottest topic in the sector right now, said a deals banker who declined to give his name in accordance with his employer’s standards about media interviews.
Last year, Reuters reported that the SEC was investigating whether Wall Street banks had fully documented employees’ work-related conversations, and in December, JPMorgan (NYSE:JPM) was penalized $200 million for “widespread” violations.
German asset manager DWS announced last month that it had set aside 12 million euros ($12 million) to cover potential U.S. fines related to investigations into its employees’ use of unapproved devices and record-keeping requirements. DWS joins a number of other banks, including Bank of America, Morgan Stanley, and Credit Suisse, which have made similar provisions.
Reuters was informed by sources at several major buy-side investment firms, including Amundi, AXA Investment Management, BNP Paribas Asset Management, and JPMorgan (NYSE:JPM) Asset Management, that they had implemented measures to ensure compliance in all contacts between personnel and customers.
SEC and CFTC spokespeople declined to comment on whether their investigations could extend beyond banks; nevertheless, industry sources anticipate that regulators would cast a larger net across the banking industry and even into the government.
After an inquiry revealed “inadequate data security” during the pandemic, the Information Commissioner’s Office (ICO), Britain’s top data protection watchdog, demanded a review of the usage of WhatsApp (NASDAQ:META), private emails, and other messaging applications by government employees last month.
Good Business for Some
Since the global financial crisis of 2007-2009, regulations governing financial institutions have been gradually strengthened, and businesses have long recorded employees’ office phone conversations.
This approach is intended to deter and discover violations such as insider trading and “front-running,” or trading on non-public information, as well as to ensure best practices in customer care.
Due to the fact that tens of thousands of finance workers and their clients are still working remotely after abandoning company offices at the onset of the pandemic, there is still a risk that sensitive conversations that should be recorded will be held inadvertently over informal or unauthorized channels.
Brad Levy, chief executive officer of the business messaging software company Symphony, stated that a surge in interest for software upgrades that enable the recording of conversations on popular messaging tools, such as Meta Platforms’ WhatsApp (NASDAQ:META), was prompted by concerns regarding the management of this risk.
Amundi, AXA Investment Management, BNPP Asset Management, and JPMorgan (NYSE:JPM) Asset Management all confirmed that they had implemented Symphony software but failed to comment on the entire scope of services they employed or when they had been pushed out.
Amundi and AXA IM have both stated that they have used Symphony services for team communications, while AXA IM has also indicated that they have used Symphony for market intelligence.
Amundi, BNPP AM, and JP Morgan AM declined to comment on whether they believed authorities would probe the record-keeping practices of asset managers following the conclusion of enforcement actions against banks.
BNPP AM Prohibited the Use of WhatsApp
BNPP AM has prohibited the use of WhatsApp (NASDAQ:META) for client interactions owing to compliance, regulatory, and risk issues, including the General Data Protection Regulation, according to a spokeswoman (GDPR).
Featured Image: Megapixl @Mohammedsoliman4
