Amid growing regulatory scrutiny and compliance concerns, financial firms are preparing to screen and potentially record staff video calls. The increased focus on video calls comes in response to a sector-wide crackdown led by the U.S. Securities and Exchange Commission (SEC) on business-related text messages sent via unauthorized platforms during the COVID-19 pandemic, when many employees were working from home.
Regulators, including the SEC, are reportedly considering extending recording requirements to video calls, prompting financial firms to engage technology specialists, law firms, and risk consultants to monitor and retain video calls as needed to meet record-keeping requirements.
The concern is that video calls could potentially be used to share non-public information illicitly, posing a compliance risk for financial institutions. While video calls have been treated as proxies for face-to-face meetings with minimal formal record-keeping obligations, regulators are likely to assess the potential for compliance breaches over such communication channels.
The increased focus on compliance in video calls coincides with efforts by U.S. and UK regulators to enhance investor protection, especially as retail investors become more active in financial markets. Compliance challenges in video communication include capturing and retaining relevant business records effectively.
While some staff may still arrange in-person meetings for sharing sensitive information, historical investigations have uncovered misconduct through work-related email and chatrooms, prompting financial institutions to evaluate potential compliance breaches over video calls, which have become routine for thousands of finance professionals.
The Financial Industry Regulatory Authority (FINRA) in the U.S. imposes the ‘FINRA Taping Rule 3170,’ which obliges certain firms to tape-record all telephone conversations between registered persons and customers for at least three years. It is unclear whether this rule extends to video calls.
Efforts to screen video calls pose unique challenges, as visual information cannot be captured through audio recordings. Additionally, chat functions and emoji-style reactions in video call platforms could provide alternative communication methods that may escape detection by surveillance applications monitoring text-based communication.
Regulatory scrutiny often broadens in response to technological advancements, and financial firms are preparing for potential changes in regulations governing video calls to ensure compliance and minimize risks.
The SEC has already imposed over $2 billion in fines related to communication compliance issues and is reportedly close to settling a comprehensive probe into breaches among investment advisors. This scrutiny has prompted financial firms to take proactive measures to ensure compliance in all forms of communication, including video calls.