Financial regulators play a vital role in maintaining the integrity of financial markets and protecting investors. One of the ways they do this is by requiring financial institutions to maintain accurate and complete records of their transactions and communications with clients. Failure to comply with these record-keeping requirements can result in significant fines and penalties.
In recent years, regulators have issued several fines for record-keeping violations in the financial services industry. To note for example, in 2019, the US Securities and Exchange Commission (SEC) fined UBS Financial Services $15 million for failing to properly retain and review certain types of communications with customers. The SEC found that UBS had failed to retain millions of text messages and other electronic communications with customers, in violation of SEC rules.
Likewise, in 2018, the Financial Industry Regulatory Authority (FINRA) fined JPMorgan Chase $2.25 million for failing to properly retain and preserve millions of electronic communications with customers. FINRA found that JPMorgan had failed to preserve more than 10 years of emails in a format that could be easily accessed and reviewed.
Since then the regulatory actions and fines have only increased. These fines are just a few examples of the consequences that financial institutions can face for failing to comply with record-keeping requirements. In addition to fines, companies may also face reputational damage and legal liability if they are unable to produce accurate records in response to regulatory inquiries or legal proceedings.
The SEC has been particularly clear about the importance of archiving electronic communications, including text messages and instant messages, with customers. In a recent statement, the SEC noted that companies are required to retain all business-related electronic communications, regardless of the platform or device used. This includes communication through social media, instant messaging apps, and other non-traditional channels. Even ‘safe’ and ‘private’ chat channels like Telegram are subject to the same archiving requirements.
The SEC also specifically addressed the issue of archiving Telegram chats, a popular messaging app among traders and investors. The SEC noted that companies must retain all business-related communications on Telegram, including both public and private messages. Companies must also be able to retrieve and produce these messages in response to regulatory requests or legal proceedings.
Overall, financial institutions have a clear obligation to maintain accurate and complete records of their transactions and communications with clients. Failure to do so can result in significant fines and legal liabilities. As technology continues to evolve and new communication channels emerge, it is important for financial institutions to stay up to date with regulatory requirements and implement effective record-keeping practices to ensure compliance. The consequences of noncompliance are significant and range from fines to regulatory sanctions to brand disrepute. Compliance teams must maintain a proactive stance on employee’s Telegram usage.