LONDON- In response to increased regulatory scrutiny, financial firms are taking steps to monitor and retain video calls made by their staff. The U.S. Securities and Exchange Commission (SEC) has already initiated a crackdown on business-related text messages sent over unauthorized platforms during the COVID-19 lockdowns. Now, there are concerns that the SEC might expand its recording requirements to include video calls like Zoom.
To ensure compliance with record-keeping requirements and mitigate the risk of illicitly sharing non-public information, finance firms are enlisting technology specialists, law firms, and risk consultants to monitor video calls.
While video calls are considered similar to face-to-face meetings and currently have minimal record-keeping obligations, experts believe regulators will soon assess the potential for compliance failures in this medium.
Regulators in both the U.S. and the UK are intensifying efforts to protect retail investors, particularly given the recent meme stock phenomenon. The challenge for financial institutions lies in adapting to the increased use of video calls in a heavily regulated work environment.
Historically, staff sharing sensitive information were more likely to arrange in-person meetings without using workplace devices. However, recent investigations have revealed misconduct over work-related email and chatrooms, prompting firms to evaluate the possibility of breaches occurring during video calls.
Some global banks have already started recording Zoom calls, with one bank targeting specific staff, including traders, and another recording all calls for future review. It remains unclear if these actions were in response to regulatory requests.
While the U.S. Financial Industry Regulatory Authority (FINRA) has the 'FINRA Taping Rule 3170' that requires the recording of telephone conversations, it is uncertain whether this rule extends to video calls. The widespread nature of SEC enforcement in this area has surprised industry experts.
Video calls introduce unique risks, as they allow employees to share non-public information visually, which audio recordings do not capture. The SEC has already imposed substantial fines for communication compliance missteps and is close to settling an expansive probe into investment advisors' breaches.
As financial firms adapt to this new regulatory landscape, the recording and monitoring of video calls have become essential to ensure compliance and reduce risks associated with rule-breaking.