Despite more than $2B in fines, financial industry still uses risky communications

investmentnews.com:

The use of messaging apps has become a major talking point in the financial services industry following the eye-watering fines given to some big names in the industry, totaling more than $2.5 billion.  

But despite the SEC’s action against firms including Wells Fargo and BNP Paribas along with separate penalties from the CFTC, a new report reveals that many in the industry are still using communications that do meet compliance requirements.

Archiving and compliance firm Smarsh surveyed people from across the industry, mostly in RIA and broker-dealer firms, to discover how widespread the use of messaging apps and other communications channels are, and which ones have already been banned by firms.

Collaboration platforms, SMS text, and social media are the platforms most commonly allowed for business purposes under firms’ policies.

Texting is a communications tool that divides the room and has done for the past decade or so. It’s an allowed channel used by 47% of respondents, although banned by 43% and considered a risk by 65% of respondents (compared to less than 40% for email and less than 30% for social media such as Facebook, Instagram, and Twitter (X)).

“In 2016, we were highlighting this disconnect between reality and what policies were telling us,” said Steve Marsh, Smarsh founder and chairman “Everyone was using text messaging, no one was archiving it, and at that point, the regulators weren’t really enforcing the rules like they are today. So here they are many years later issuing some gigantic fines.”

Marsh added that business communications is happening over text messaging whether it’s allowed or not.

While just 17% of firms allow the use of encrypted messaging apps such as WhatsApp, more than 20% do not have a