High stakes mean compliance monitoring of unauthorised communications required
A US bank received heavily reduced fines from the US SEC and CFTC for proactively admitting unauthorised channels were used for business-related communications which were neither recorded nor monitored.
According to the CFTC the bank is the only firm to self-report their recordkeeping and supervisory failures.
It is not enough to have policies and attestations
What these fines show is that it is not enough for firms to have a list of approved communication channels that are monitored, subject to review and when appropriate archived.
It was also not enough that the bank required regular attestations from dealers that they were not using personal text messages and social interactions to engage in business-related communications.
Compliance monitoring, disciplinary action and enforcement are all key
It was the failure of the bank to ensure that employees complied with their communications policies and procedures. It was also the failure of the bank to maintain those business-related communications and failing to supervise its business effectively.
Although approaching employees about the usage of personal devices is a sensitive area, the stakes are so high because their unauthorised usage can undermine the effectiveness of the market abuse regime.
Given the importance of market integrity and confidence in the financial services sector, the proactive compliance monitoring for breaches of the firm’s communication policy and procedures is key.
Being clear about the firm’s business-related communications policy, as well as informing employees about the firm’s disciplinary and escalation processes is also essential.
These controls should already be in place for firms that have conducted and acted upon a comprehensive market abuse risk assessment (MARA). The potential for regulatory enforcement action is high for firms with gaps in their controls.
Additional Resources:
- To learn more about how Kaizen’s communications platform could help your firm comply with global market abuse regulation or for assistance with your market abuse risk assessment, please get in touch.
