SEC probing Wall Street banks’ documentation of digital employee communication: report
The U.S. Securities and Exchange Commission (SEC) has opened an investigation into how Wall Street firms track their employees’ digital communications, according to a report published by Reuters on Tuesday.
Sources close to the matter told the news service that SEC enforcement staff have contacted numerous banks in the past few weeks to see if they have been adequately recording work-related conversations, including text messages and emails.
This “sweep” of banks apparently stems from another probe the SEC was conducting for some time into one specific financial institution, according to sources speaking to Reuters, though they did not name the institution.
However, Reuters noted that JPMorgan Chase disclosed in August that it had received inquiries regarding its “compliance with records preservation requirements in connection with business communications sent over electronic messaging channels” that it had not approved.
The SEC declined to comment on the matter when reached by The Hill.
As one source told Reuters, there is not a clear legal basis in the U.S. for which an employer can demand to see an employee’s personal communications. As such, many firms ban the use of personal emails, texts and other forms of communications. New communication apps present a new challenge for this workaround, however.
When he took office in April, SEC Chairman Gary Gensler was seen as the ideal chairman for the new Democratic administration, having helped to expand oversight during the Obama administration in the immediate aftermath of the 2008 financial crisis.
Reuters noted that this recent sweep could be a sign of the SEC’s expanded enforcement and oversight under Democratic control.
Head of SEC enforcement Gurbir Grewal addressed the issue of “recordkeeping violations” in a speech last week. He pointed to action that the SEC took against a California broker last year who failed to document text messages that had to do with the timing of trades and the prices of some securities.
“We continue to see in multiple investigations instances where one party or firm that used off-channel communications has preserved and produced them, while the other has not. Not only do these failures delay and obstruct investigations, they raise broader accountability, integrity and spoliation issues,” said Grewal.
“Listen, many of these are not even new technological advances. After all, my 75 year-old mother has been texting my 13-year-old daughter for years, and I am certain many in this room have sent or received professional communications on personal devices or unofficial communications channels,” he added. “You need to be actively thinking about and addressing the many compliance issues raised by the increased use of personal devices, new communications channels, and other technological developments like ephemeral apps.”
–Updated at 3:17 p.m.