- A number of fund companies are increasing controls on employee messaging apps like WhatsApp.
- They join banks in trying to make sure staff follow the laws when conducting business remotely.
- This is intended to prevent and expose violations like insider trading and “front-running”.
As they join banks in trying to make sure staff follow the laws when conducting business with clients remotely, asset managers are increasing controls on personal communication apps like WhatsApp.
Regulators had previously started to crack down on using unauthorized messaging services to discuss potentially market-moving issues, but the situation became more urgent in 2020 when the pandemic made it necessary for more finance personnel to work remotely.
Banks have made up the majority of the companies investigated by the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) for communications and record-keeping violations; these institutions have collectively paid fines or set aside more than $1 billion to cover regulatory penalties.
However, fund companies with enormous asset bases are likewise becoming more scrutinizing employee-client interactions.
According to one deals banker who wished to remain unnamed in accordance with his employer’s policies regarding speaking to the media, “It is the biggest topic in the industry right now.”
In December of last year, JPMorgan was penalized $200 million for “widespread” violations, according to an international news agency, which also claimed that the SEC was investigating whether Wall Street firms had effectively documented employees’ work-related contacts.
A number of banks, including Bank of America, Morgan Stanley, and Credit Suisse, have made similar provisions. German asset manager DWS announced last month that it had set aside 12 million euros ($12 million) to cover potential U.S. fines related to investigations into the use of unapproved devices and record-keeping requirements by its employees.
According to sources at a number of other investment companies, or what is known as the “buy-side” in the financial community, including Amundi, AXA Investment Management, BNP Paribas Asset Management, and JPMorgan Asset Management, they have implemented tools to ensure that all interactions between employees and clients are compliant.
Although the SEC and CFTC’s spokespeople declined to comment on whether their investigations would go beyond banks, industry sources anticipate that authorities will cast a larger net throughout the banking sector and even into government.
Following an inquiry that revealed “inadequate data security” during the pandemic, Britain’s Information Commissioner’s Office (ICO), the nation’s top data protection watchdog, demanded a review of the usage of WhatsApp, personal emails, and other messaging applications by government officials.
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