As the use of electronic communications grows business must adapt to new forms of communications.
Companies are trying to get ahead of the electronic communications curve but failing miserably as today’s announcement by the FCA highlights.
Traditional forms of communication are relatively simple to monitor, record and archive. If an advert appears in a newspaper, then it has probably passed through several copywriter and compliance department before reaching the advertising agency that places the advert. At each stage of this process a copy of the advert will have been recorded and archived for future reference.
If a financial institution publishes a brochure, then again it will have been through many departments before reaching the printers and all content will have been checked and double checked.
This type of control has enabled companies to retain strict control of its messages and what its clients are exposed to. With the explosion of electronic communications, the whole communications landscape has changed forever.
Today’s announcement by the FCA that a managing director with Jefferies has been fined over 37 thousand pounds for divulging confidential client details using the Facebook owned WhatsApp messaging service. This fine only serves to highlight an apparent lack of adequate control of electronic communications at the global investment banking firm.
The FCA has been looking at electronic communications since it published its first guidance paper FG15/4 in March 2015. The FCA said at the time;
“The finalised guidance on social media intends to help firms understand how they can use these media and comply with our rules. We also remind firms that our rules are intended to be media-neutral, to ensure that consumers are presented with fair and balanced information at each stage of the customer journey.”
The fine by the UK’s Financial Conduct Authority highlights the increasing problem new media poses to companies that need to monitor and archive all electronic communication.
The use of electronic communications is something that plays a large part in the revised MiFID II regulations that will come into force in 2018.
The Financial Services industry in Europe is facing the biggest shake-up of regulatory legislation for over a decade. Driven in part by widespread consumer mistrust, the recasting of the Markets in Financial Instruments Directive, known as MiFID II and the accompanying Regulation, MiFIR, will put into place far-reaching new rules, which aim to strengthen investor protection, prevent market abuse, increase transparency and re-establish consumer trust.
“The biggest shake-up of regulations for a decade”
In order to achieve these objectives, MiFID II provides a legislative framework set out by the European Commission to leverage disclosure and reporting as regulatory tools and introduces robust compliance obligations for firms operating within the EU.
Some of the most contentious aspects of the new regulations concern the use of communications recording - both in terms of the scope of communications that must be recorded and the requirement for firms to monitor recordings in order to remain compliant.
With electronic communication being such a large part of everyday life it is hard to see how firms can eliminate this type of activity entirely. Only by monitoring, recording and archiving all electronic communications can a firm begin to control what is said when and to whom.
If you have the record stored in a time stamped, encrypted archive then you may have a chance to defend yourself should a regulator or litigator ever come calling.