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 https://www.sec.gov/news/speech/grewal-pli-broker-dealer-regulation-and-enforcement-100621 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.”
Failure to retain and produce communication records can impede regulatory investigations, Grewal said in the remarks.
Last year, Morgan Stanley fired https://www.reuters.com/article/us-morgan-stanley-commodities/top-morgan-stanley-commodities-executives-leave-after-rules-breach-source-idUSKBN2751LK 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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