About a-team Marketing Services
The knowledge platform for the financial technology industry
The knowledge platform for the financial technology industry

A-Team Insight Blogs

Are You Ready for the Tide to Change for Compliant Communications?

Subscribe to our newsletter

By Jennie Clarke, Senior Manager at Global Relay, the electronic communications compliance specialists.

Regulatory obligation and guidance surrounding the capture, monitoring and surveillance of digital communication channels is far-reaching and increasingly robust. The Financial Conduct Authority’s (FCA) Handbook SYSC 10A, for example, requires firms to “take all reasonable steps to record telephone conversations, and keep a copy of electronic communications” that relate to financial activities. Moreover, it asks that firms take all reasonable steps to prevent an employee from “making, sending or receiving relevant telephone conversations and electronic communications on privately owned equipment” if the firm is not able to record or copy that information.

Obligations around compliant communications are not limited to the UK. In the U.S., for example, FINRA Rule 3110 requires firms to “establish and maintain a system to supervise the activities of each associated person that is reasonably designed to achieve compliance with applicable securities laws and regulations”. As compliance teams will be well aware, firms are under increasingly strict instruction to manage their business communications to ensure compliance.

Staying in the US, few will have missed the mammoth $125 million fine issued by the Securities and Exchange Commission (SEC) to JP Morgan in 2021 for its failure to “maintain and preserve written communications”. What UK-based folk may have missed, however, is the near-constant publication of similar regulatory messaging surrounding business communications.

In the past few months alone, FINRA issued fines to two senior managers who continued to use text messages for business, which had been prohibited by the compliance team. Then, the U.S. Department of Justice alluded to new rules in the pipeline surrounding the use of personal communication devices, listing senior manager involvement in non-compliance as an “aggravating factor”. As well as this, the SEC has made significant amendments to recordkeeping Rule 17a-4, aimed at modernizing the 25-year old framework, as well as announcing that nearly 20% of fines issued in 2022 concerned recordkeeping failures.

Again, this has all taken place over the course of three months. One thing is clear in the U.S., communication is top of mind for the regulators.

As with all financial regulation, this wave of regulatory scrutiny will not be limited to the U.S. for long. The tide is slowly shifting, with regulatory focus slowly crossing the Atlantic and making its way to the UK.

Despite this, many firms across the globe still do not have a compliant, watertight strategy to enable compliant communications. In light of increased regulatory scrutiny, most firms have moved to banning certain channels for communication – whether it’s SMS or WhatsApp. However, if continued enforcement tells us anything, it is that the banning of channels is not an effective solution. In many instances, employees continue to use banned channels to communicate, the problem then being that none of this information is captured. These illicit communications are not compliant.

As was recently reported, Morgan Stanley has taken to fining individual employees for their use of illicit communications, with fines apparently ranging from the thousands to millions. What is interesting is that none of this would be necessary if the firm had an effective, compliant solution in the first place. Instead of using ineffective channel bans – and then fining employees who do not comply – firms could enable WhatsApp, SMS, or any other communication channel for business and employ effective compliance technology to capture those messages and store them in a way that would stand up to regulatory scrutiny. Solutions are undoubtedly more effective than restrictions.

Many are expecting that the waves of enforcement for non-compliant communication will soon be lapping at the feet of UK firms. Most are standing at the water’s edge, waiting with bated breath for a big-bang enforcement before they take action, and crossing their fingers that they won’t be the test case.

Instead of looking out to sea, these firms should be looking for effective solutions while the UK regulatory focus is still in its nascent stages. Compliance teams should be bolstering their defences and battening down the hatches to ensure their communication policies, procedures and controls are watertight. Only then, when the waves finally come crashing down, can the compliance team sit back knowing that they’re home and dry.

Subscribe to our newsletter

Related content


Recorded Webinar: Market Abuse: Trends and Issues to Watch Out for in 2023

With the FCA taking a supervisory approach to regulating firms, many regulatory interventions won’t end up in the public domain. What are they looking for and how do you ensure you stay on the right side of their supervision? Join this webinar with A-Team Group and Leaman Crellin to discover what you need to focus...


Predictions 2023: A Year of Evolution and Adaptation

By Ludovic Blanquet, Chief Strategy & Transformation Officer, Xceptor. As the curtains begin to draw on 2022, financial institutions are anxiously navigating the challenges imposed by war in Ukraine, rampant inflation, and looming recessions. If it was hoped the diminishing threat of Covid would offer some respite, that hope was short-lived. However, advancements were made...


FinCrime Tech Briefing, London

RegTech Insight (from A-Team Group) is proud to announce the launch of its FinCrime Tech Briefing taking place in both London and New York this summer and focusing on RegTech for AML and Financial Crime Compliance.


Regulatory Data Handbook – Fourth Edition

Need to know all the essentials about the regulations impacting data management? Welcome to the Fourth edition of our A-Team Regulatory Data Handbook which provides all the essentials about regulations impacting data management. A-Team’s series of Regulatory Data Handbooks are a great way to see at-a-glance: All the regulations that are impacting data management today A...