Improper Usage Of Prohibited Channel
FINRA issued a $7,500 fine to a broker who used his cellphone to communicate with customers. According to a settlement reached last August 2022. The broker sent two business-related text messages to customers from June 2018 to April 2020 without the approval or supervision of the firm. According to the regulator, the text messages covered account performance, market events, and transactions which is a sanction to FINRA compliance chat in text messaging apps
FINRA stated that the broker caused his company to violate Rule 4511. It requires preserving accurate records and client communications for a minimum of three years because they did not log the messages.
Another instance will be FINRA fined $27,500 to another broker for failing to notify his member firm that he was involved in a brokerage program. Activities outside of the business (OBA) and use of a personal messaging app to communicate with customers. The broker made it impossible for the firm to keep complete books and records.
- Recent regulatory reforms focused on unauthorized communications from financial advisors. U.S. regulators imposed $1 billion in fines upon some of the most important investment banks for failing to supervise the use of mobile messaging apps to conduct business.
- Although a prohibition policy might have been influential in the past, it is practical to refrain from prohibiting communication via text message or mobile apps like wechat for compliance in FINRA for a successful financial services company. If advisers communicate with clients via restricted channels, a prohibition policy won’t save firms from being fined.
- Companies should know the encryption and security settings for any communication platform their employees use.
What Can You Do?
Firms that want to avoid regulatory enforcement need to update their mobile policies to comply. These are some suggestions:
- Review current policies and procedures. Policies must be updated to reflect any changes in regulations and firm policies. Policies and practices must be updated regularly to keep up with all new communication methods between reps and clients.
- Create employee training programs. Make sure all employees are aware of all policies and allowed communication channels. At the beginning of employment, and every subsequent time, request regular attestations. Employees should be mindful of the policy guidelines and allowed communication channels that firms are communicating.
- Work with an innovative archiving service provider. It captures and archives social media posts, emails, text messages, web apps, and other communications. These business communications should be captured and archived to ensure compliance with record retention rules. LeapXpert is the perfect example of archiving service provider that makes your worries go away. Contact them here for more information.