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SEC examining use of outside message apps by investment advisors

On Behalf of | Oct 20, 2022 | Securities and Compliance

The Securities and Exchange Commission is expanding the scope of its investigation into the use of outside messaging apps such as WhatsApp in the financial industry, according to Financial Advisor.

The SEC has taken its probe of the issue beyond major financial institutions and is now also scrutinizing investment firms and advisors. The commission recently sent to letters to dozens of firms asking for information on their use of personal devices and apps for matters related to official business, the report stated. The firms were also asked about their practices for the retention of electronic communications transmitted on the platforms.

Financial firms are required to monitor and save employee communications involving their business and customers, but compliance became more challenging when many employees began working remotely during the pandemic.

Last month, the SEC charged 15 broker-dealers and one affiliated investment advisor with widespread recordkeeping violations after finding widespread failures in maintaining and preserving electronic communications. The commission said employees with the firms routinely communicated about business matters through the use of text messaging applications on their personal devices, but the records of those communications were not properly preserved. The firms agreed to pay combined penalties of over $1.1 billion.

In addition, major banks have paid a combined $2 billion in financial penalties following allegations by the SEC and Commodity Futures Trading Commission that their employees conducted official business through the use of unauthorized personal devices.

The attorneys at Lewitas Hyman include former senior attorneys at the SEC whose legal experience and industry knowledge make them uniquely qualified to provide counsel on securities regulatory, compliance and enforcement matters. If your firm is facing an investigation from a regulatory agency, please contact us at (888) 655-6002 or through our online contact form.