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Firms concerned video calls may become part of SEC messaging crackdown

On Behalf of | Oct 27, 2023 | Securities and Compliance

Financial firms are bracing for the prospect that video calls may become part of the SEC’s crackdown on unauthorized messaging that thus far has included texts and emails, according to a report by Reuters.

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 COVID-19 pandemic.  The SEC then launched a probe into the use of unapproved outside messaging apps such as WhatsApp in the financial industry.

According to the Reuters report, firms believe they may have to begin screening staff video calls held on Zoom or similar platforms to ensure compliance with record-keeping requirements in case the calls are scrutinized by regulators.  A dozen sources cited in the article said companies have retained technology specialists, risk consultants and law firms to assist in their compliance efforts.  They will help with retaining and monitoring video calls to make sure sensitive information is not being illegitimately shared.  Sources also said at least two major global banks are now recording Zoom calls

The report notes that video calls are not currently subject to stringent record-keeping requirements.

In October 2022, 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.

More recently, the SEC has been negotiating settlements with about two dozen firms who have been the subject of recent investigations.

The increasing use of video calls now adds one more potential area of regulatory scrutiny, industry experts said.  “The way we work has evolved hugely over a very short period of time and firms need to make sure they are absolutely up to speed with the new exposures this brings,” said Claire Garrett, head of the financial institutions practice at Marsh.

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. When it comes to regulatory compliance and enforcement matters, our attorneys have dealt with investigations and enforcement actions stemming from allegations including violations of SEC, FINRA, and SRO rules and regulations. If your firm is facing an investigation from a regulatory agency, please contact Lewitas Hyman at (888) 655-6002 or through our online contact form.