Over recent years, the U.S. Securities and Exchange Commission (SEC), Financial Industry Regulatory Authority (FINRA), and Commodity Futures Trading Commission (CFTC) have increased their scrutiny of off-channel communications.
Since 2021 the SEC and CFTC have conducted a number of investigations and levied significant fines and other enforcement action against companies making business communications on personal devices and non-sanctioned platforms.
Fines for non-compliance have exceeded $2.7 billion and this has raised the importance of compliance of cross-channel communications.
According to Julia Applegate, business communications specialist at Esendex, there are some essential steps financial services businesses need to take to ensure compliance across digital communications channels.
Julia said:
“Communication is essential to building trust with customers and this is even more important when dealing with people’s finances. We also know that customers expect to be able to make contact and access services across a range of channels at a time that is convenient for them.
“Business communications for financial professions are heavily regulated and this is vital for retaining consumer trust in the long-term. Text messaging has become one of the most effective ways to stay in touch, but while some financial advisors may be tempted to send the occasional text from their personal phone, this represents a major risk, not only for them, but also for their employer and customers.”
Stay up-to-date with the latest regulations
Financial services businesses are heavily regulated by the SEC and FINRA. With scrutiny of off-channel communications increased, it’s important to monitor the latest regulatory notices. A prominent update from FINRA reminded firms of their obligation to retain records of digital communications that relate to their business.
Clarify policies
Many financial services businesses will conduct regular, scheduled reviews of policies and procedures, and digital communications must not become a ‘set it and forget it’ initiative. Your documents should make it clear what communication channels are acceptable, as well as which are banned and monitored.
The world of business communications is rapidly changing, so any new channels will require an update to policies, clearly outlining how and when they can be used.
Put training schemes in place
It’s not just the business which is responsible for actioning changes to avoid SEC and FINRA scrutiny. Employees should be trained on the differences between business and non-business communications, and understand that any business communications need to be retained, ‘reasonably supervised’, and retrievable.
Use a platform to simplify separation
There is always a risk when employees are using the same cell number for business and personal communications, and it causes privacy complications in the case of an audit. Using an online SMS portal or customizable SMS API and a separate phone number and device will create an extra security barrier between business communications.
Specialist SMS platforms also make it easy to include an option for customers to opt-out of communications, which is another legal requirement.
Maintain archive records
SMS platforms also maintain a record of conversations, meaning your company can access and archive any text messages, so they can be easily retrieved when it is time for an audit. Businesses benefit from the knowledge they can monitor and manage business messages, as well as maintaining regulatory compliance.
Julia added:
“Businesses operating across the financial services sector are well-aware of the risks of a failure to ensure compliance. Modern communication channels have opened up new and more convenient ways to keep in touch with customers, but these steps will help to ensure that firms can maintain security and continue to build trust through their communications.”
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