Smarsh, a technology that captures and retains digital communications for compliance, is acquiring an Israeli company, TeleMessage, to address the ongoing struggle to monitor private messaging apps used by employees at financial services firms.
TeleMessage specializes in monitoring and archiving communications on popular consumer messaging apps like WhatsApp, WeChat, Telegram and Signal. Combined with existing services from Smarsh, the company says it can monitor corporate calls and messages across corporate phones, so-called “virtual phones” for advisers who use their own device, consumer messaging apps and collaboration apps like Zoom, Slack and Microsoft Teams.
Use of these apps has exploded since the pandemic and the resulting shift to remote work, but compliance departments at many firms, including large institutions, have struggled to keep up. While firms have always needed to capture and archive digital communications for compliance and many advisers have long had access to compliance texting services, apps like WhatsApp and WeChat create unique risks for regulated firms, Goutam Nadella, Smarsh’s chief product officer, said in a statement. There are significant gaps at many firms in their ability to monitor employees using these to communicate.
“Given the new hybrid workforce and how digitally connected everyone is, it’s more challenging than ever to monitor all the new voice and text channels,” Nadella said. “Simply put, firms everywhere are overwhelmed by all the new channels — like WhatsApp, WeChat and more effective coverage for Bring Your Own Device (BYOD) models — that are necessary for business but pose real risks, because of their variety and the volume and velocity of the data they produce.”
The Securities and Exchange Commission fined JPMorgan Chase & Co. $125 million in December because it found financial advisers, managing directors and senior supervisors routinely communicating using WhatsApp or personal email addresses on their own mobile devices. The Commodity Futures Trading Commission imposed an addition $75 million penalty.
Though JPMorgan had policies and procedures in place to track those messages, it didn’t follow through on them, something that will be a focus of the SEC’s enforcement division throughout the year.
“You can have great written policies and procedures, but if you’re not actually taking steps to implement them on a regular basis, they’re not worth much,” Dabney O’Riordan, co-chief of the asset management unit in the SEC's division of enforcement, said at the Investment Adviser Association compliance conference in March.
So far in 2022, Goldman Sachs Group Inc., HSBC Holdings Plc and Citigroup Inc. are also facing similar investigations over unmonitored communications.
[Read more: New ways to communicate are complicating compliance]
Tandems and Zeplyn roll out new AI agents and assistants as wealthtech firms compete to run more of advisors’ back-office work
Regardless, major industry players are introducing retention bonuses as a way to keep advisors in their seats.
Allspring’s active strategies join Vestmark’s tax-aware UMA platform as RIA adoption gains traction for custom portfolios
“A better tool does not on its own make a better outcome,” said Humanity Labs CEO Andrei Pop.
“[Vestmark] bring to us the very scaled sponsor trading,” said Envestnet’s Sue Burton.
Knighthead Life entered the market with a competitive MYGA. A strong launch earned advisor confidence and paved the way for FIAs.
As AI makes financial information more accessible than ever, Lana Hock explains why human judgment, trust, and empathy remain the qualities clients value most in a financial advisor
