Regulatory Wrap Episode 34: FINRA Reacts to an Emerging Culture of Off-Channel Comms

In Regulatory Wrap for the week to June 28, Jennie Clarke covers FINRA’s set of fines for off-channel communications activities, underlining the consequences of improper recordkeeping and supervision.

02 July 2024 2 mins read
Profile picture of Kathryn Fallah By Kathryn Fallah

In Regulatory Wrap for the week to June 28, 2024:

In this Regulatory Wrap, we review responses to recordkeeping requirements on both sides of the industry – as analyzed in our 2024 Industry Insights report, more firms are forming comms capture plans to comply with regulators compared to 2023. However, as seen through ongoing recordkeeping enforcements from regulators like FINRA, the value of not just preventative but proactive measures to identify and curb risks has yet to resonate completely.

Highlights:

1. FINRA penalized a “top ranked” Morgan Stanley broker by issuing a 45-day suspension and $10,000 fine for misconduct, which included personal phone use for business related messages

2. FINRA’s June Disciplinary Actions also contained a $500,000 fine against a firm for “failure to preserve and reasonably supervise business related text messages” despite company policies prohibiting these activities and the firm’s knowledge of these actions occurring

3. Though the rigorous succession of enforcements against both firms and individuals have detailed regulatory expectations, recordkeeping retention and communications surveillance remain problem areas

4. Conversely, our Industry Insights report has indicated that firms are trending toward capture solutions, as only 8% of respondents said they don’t have a clear plan to capture off-channel communications compared to 25% in 2023

5. As opposed to banning prevailing communications channels, which enforcements have illustrated is an ineffective way to control communications, utilizing solutions that allow for complete channel capture ensures that no message will go unrecorded

This week’s episode is brought to you by our Head of Content, Jennifer Clarke.

Off-channel communications enforcements persist, though stats from our Industry Insights Report show a shift in firms looking more deeply into how to ensure they’re meeting record retention requirements. What steps has your firm taken to account for multiplying messaging platforms that pose a risk to compliance if not appropriately captured?

 

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