The Significance of eComms Recordkeeping in the FinTech Industry

In recent times, regulatory bodies such as the SEC and CFTC have intensified their scrutiny of Wall Street firms due to lapses in recordkeeping practices, according to Fintech Global. This has led to substantial fines exceeding $1.5 billion. This trend of stringent enforcement is expected to persist for both major and minor financial institutions.

Sanjay Wadhwa, SEC Deputy Director of Enforcement, emphasized the continuation of efforts to enforce industry-wide compliance. He stated, «we know that other SEC-regulated entities have committed similar violations, and so our work to enforce industry-wide compliance continues.»

McComplianceOffice (MCO) has shed light on the critical importance of firms preserving their electronic communications (eComms). Sanjay Wadhwa urged firms to strengthen their record retention processes to prevent potential future misconduct.

The period between December 2021 and August 2023 witnessed recurring issues in over 30 charges, including unauthorized app usage, failure to retain communications, inadequate execution of compliance policies, and widespread use of unofficial communication channels by employees at all levels.

MCO stressed the significance of company culture in ensuring compliance. For insights on adopting best-practice frameworks, a webinar titled ‘Beyond Wishful Thinking: How to Create a Thriving Culture of Compliance’ featuring Michael Rasmussen from GRC 2020 is recommended.

Gary Gensler, the SEC Chair, emphasized the historical importance of recordkeeping protocols for market integrity. He highlighted the necessity for businesses to conduct official communications exclusively through authorized mediums and preserve these conversations meticulously.

Regulations such as the SEC Rule 17a-4 mandate firms to retain electronic records for three to six years, depending on the type, in an immutable format. The rules updated in October 2022 allow records to be conserved using electronic systems that log and safeguard communications.

Similar emphases on electronic communication longevity and security are present in European, British, and Canadian regulations, requiring strict compliance and retention.

Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, stressed the importance of recordkeeping. He noted that firms’ books and records must be accessible to investigate allegations of wrongdoing.

The FCA highlighted the compliance risk stemming from unmonitored communication channels, including platforms like WhatsApp for financial dealings.

In the digital era, companies must navigate evolving communication norms, including interpretative nuances like emojis, as pointed out by Michael Solomon at the 2023 FINRA Annual Conference.

Compliance tech tools are no longer a luxury but a necessity. They enable firms to manage, monitor, and retain electronic communications in line with recent mandates. MCO’s solutions, such as eComms Review and eComms Keep, help businesses ensure compliant communications and robust record retention, diminishing compliance risks.

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