Use of Personal Communications Channels. A Compliance Concern for Regulated Entities

May 18, 2023

Use of Personal Communications Channels. A Compliance Concern for Regulated Entities

In today's digital age, the use of personal communications channels for work purposes has become a major point of contention for regulated entities. Financial services regulators globally, which includes the Securities and Exchange Commission (‘SEC’) and the UK's Financial Conduct Authority (FCA), require employers to oversee and monitor workplace communications and maintain records. However, this poses an increased challenge when work-related communications occur on personal channels. Recent enforcement actions and the impact of remote working have brought this issue to the forefront.

Regulatory Enforcement and the SEC Fines

In November 2022, the SEC imposed fines on a number of Wall Street firms for their failure to adequately monitor employee use of personal communications channels for work-related activities. The action taken shows that the issue remains a high priority for regulators. The fines also highlight the importance of firms' proactivity in identifying and addressing such compliance failures.It is worth noting that the firms that self-reported the problems and took remedial actions received reduced penalties. This cooperation underscores the significance of having robust policies in place and ensuring compliance from employees at all levels.

The Role of "Tone from the Top"

Sustaining a culture of compliance starts with "tone from the top." Senior management within regulated firms must demonstrate a commitment to enforcing policies and monitoring employee conduct. By actively considering how policies are enforced and promptly addressing any concerns, firms can foster an environment that prioritises compliance. The Director of the SEC's Enforcement Division, Gurbir S. Grewal, emphasised the value of disclosing violations and the importance of following recordkeeping requirements.

The Challenges of Remote Work and Monitoring Compliance

The COVID-19 pandemic has forced many organisations to implement widespread remote work arrangements. While this has allowed businesses to continue operations flexibly, it has also posed additional challenges for compliance monitoring. With employees using personal communication channels for work-related discussions, it becomes even more critical for regulated firms to have robust systems & controls in place to monitor and record these communications.

Remaining Alert to the Risks

Regulated entities should remain vigilant and alive to the risks associated with employee use of personal communications channels for work purposes. Proactive steps, such as regular policy reviews, employee education, and effective monitoring systems, are essential to mitigate compliance risks. Implementing effective horizon scanning to stay updated on regulatory requirements and enforcement actions, firms can adapt their strategies and take necessary actions to ensure compliance.

What it means for you

MEMA Consultants has supported numerous firms as a trusted compliance and regulatory partner. In addition to assisting you as-and-when required, our team of specialists can provide ongoing guidance on how to meet the regulations. Our team will not only keep you up to date with new regulations on the horizon, but will also ensure you are fully compliant today.  

If you want more information on the measures you can take to reduce the risk of employees using personal channels for work related purposes, reach out to MEMA for more information on how we can support you in preparing for the new changes.


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