SEC and FINRA’s Focus on Off-Channel Communications: What You Need to Know
In recent years, the SEC and FINRA have intensified their focus on the use of off-channel communications—messages sent through unapproved platforms or devices. These efforts highlight the importance of maintaining proper oversight, documentation, and supervision of business-related communications, regardless of the medium.
Off-channel communications refer to any business-related conversations conducted outside of approved systems, such as personal emails, text messages, and messaging apps such as WhatsApp. In most instances, these platforms lack the archiving and supervision capabilities required by regulators.
Advancements in technology, coupled with the rise of remote work, have made monitoring employee communications more challenging. Regulators have taken notice.
Since 2021, more than 100 firms have been fined approximately $2 billion for failing to preserve and supervise off-channel communications. The SEC and FINRA have made this issue a prominent focus of their examination and enforcement programs, signaling continued scrutiny in the years ahead.
To address this growing risk, there are easy steps that firms can take:
- Evaluate Policies: Review and update policies to clearly define approved communication channels.
- Implement Technology: Adopt tools to archive and monitor communications across approved platforms.
- Employee Training: Provide on-going training to employees about the risks and compliance requirements for electronic communications.
- Test Controls: Regularly review and test supervisory controls to identify and address any gaps in the monitoring of business-related communications.
The SEC and FINRA’s focus on off-channel communications is expected to grow, particularly as technology evolves. Firms must proactively adapt to these changes to ensure compliance and avoid enforcement actions.
By establishing a culture of compliance and leveraging advanced technology, firms can navigate these challenges effectively.
