EXCLUSIVE U.S. SEC opens inquiry into Wall Street banks' staff communications -sources

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Reuters 12 October, 2021 - 05:45pm

SEC probing Wall Street banks' documentation of digital employee communication: report | TheHill

The Hill 12 October, 2021 - 10:05pm

Sources close to the matter told the news service that SEC enforcement staff have contacted numerous banks in the past few weeks to see if they have been adequately recording work-related conversations, including text messages and emails.

This "sweep" of banks apparently stems from another probe the SEC was conducting for some time into one specific financial institution, according to sources speaking to Reuters, though they did not name the institution.

However, Reuters noted that JPMorgan Chase disclosed in August that it had received inquiries regarding its "compliance with records preservation requirements in connection with business communications sent over electronic messaging channels" that it had not approved.

The SEC declined to comment on the matter when reached by The Hill.

As one source told Reuters, there is not a clear legal basis in the U.S. for which an employer can demand to see an employee's personal communications. As such, many firms ban the use of personal emails, texts and other forms of communications. New communication apps present a new challenge for this workaround, however.

Reuters noted that this recent sweep could be a sign of the SEC's expanded enforcement and oversight under Democratic control.

Head of SEC enforcement Gurbir Grewal addressed the issue of "recordkeeping violations" in a speech last week. He pointed to action that the SEC took against a California broker last year who failed to document text messages that had to do with the timing of trades and the prices of some securities.

"We continue to see in multiple investigations instances where one party or firm that used off-channel communications has preserved and produced them, while the other has not. Not only do these failures delay and obstruct investigations, they raise broader accountability, integrity and spoliation issues," said Grewal.

"Listen, many of these are not even new technological advances. After all, my 75 year-old mother has been texting my 13-year-old daughter for years, and I am certain many in this room have sent or received professional communications on personal devices or unofficial communications channels," he added. "You need to be actively thinking about and addressing the many compliance issues raised by the increased use of personal devices, new communications channels, and other technological developments like ephemeral apps."

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Wall Street banks warned by SEC to avoid private messages

The Times 12 October, 2021 - 10:05pm

Bankers’ texts, emails and online messages have been drawn into the spotlight on Wall Street as regulators investigate whether institutions are keeping a proper track of business-related communications across all platforms.

America’s top financial watchdog has urged banks to ensure that they are “actively thinking” about ways to monitor relevant conversations across a growing number of digital services.

The US Securities and Exchange Commission has launched a broad inquiry into how firms are remaining on top of their employees’ communications, according to the Reuters news agency, which cited three sources familiar with the matter.

After the pandemic prompted a significant number of bankers to work from home for sustained periods last year, officials are scrutinising whether their employers are still sufficiently recording all relevant messages.

U.S. SEC opens inquiry into Wall Street banks' staff communications

Economic Times 12 October, 2021 - 10:05pm

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Exclusive-US SEC opens inquiry into Wall Street banks' staff communications -sources

Yahoo Canada Finance 12 October, 2021 - 10:05pm

WASHINGTON (Reuters) - The U.S. Securities and Exchange Commission (SEC) has opened a broad inquiry into how Wall Street banks are keeping track of employees' digital communications, three people familiar with the matter told Reuters.

SEC enforcement staff contacted multiple banks in recent weeks to check whether they have been adequately documenting employees' work-related communications, such as text messages and emails, with a focus on their personal devices, said the people, who spoke on the condition of anonymity.

The industry "sweep" is a further sign that the SEC is ramping up enforcement under its Democratic leadership, and highlights the challenges Wall Street banks face keeping track of staff communications in the work-from-home pandemic era.

The SEC periodically conducts sweeps to quickly gather information on issues it suspects may be widespread. Sweeps can sometimes, although not necessarily, lead to formal probes.

The sweep appears to stem from a probe the agency has been conducting for some time into an individual financial institution, two of the sources said, without naming the firm.

In August, JPMorgan Chase & Co disclosed that it had been fielding regulatory inquiries concerning its "compliance with records preservation requirements in connection with business communications sent over electronic messaging channels" that the bank had not approved. It said it was discussing a "resolution" with regulators, without specifying which ones.

Spokespeople for the SEC and JPMorgan declined to comment.

The SEC and the Financial Industry Regulatory Authority, Wall Street's self-regulatory body, require broker-dealers to keep records of all business-related communications. Banks have to walk a fine line to comply with those requirements without infringing upon employees' privacy, said one of the sources.

In the United States, there is no clear-cut legal basis on which an employer can demand to inspect employees' personal communications, while in other countries doing so may breach data protection statutes, the source said.

As a result, many financial firms ban the use of personal email, texts and other social media channels for work purposes, but keeping up with a proliferation of communication apps -- especially during the pandemic -- is a challenge for companies.

In a speech last week, the SEC's head of enforcement Gurbir Grewal warned that institutions should stay on top of the many "issues raised by the increased use of personal devices, new communications channels, and other technological developments." For speech - https://www.sec.gov/news/speech/grewal-pli-broker-dealer-regulation-and-enforcement-100621

Failure to retain and produce communication records can impede regulatory investigations, Grewal said in the remarks.

Last year, Morgan Stanley fired two top executives due to the unauthorized use of WhatsApp to discuss work matters.

(Editing by Michelle Price and Nick Zieminski)

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