financial services, finra and keywords: don't 'set it and forget it' - ronco food dehydrator
Financial services companies face a difficult battle in managing and overseeing communications within the organization so that they can comply with regulatory requirements.
It's not just about email.
In addition to email, employees use unified communications, instant messaging, video, collaboration tools and social media to communicate in real time with each other, customers, partners, suppliers and the general investment public.
Regulators around the world have made it clear that "content is decisive" and neutral about channels.
Therefore, enterprises need to control, capture, supervise, archive and produce electronic documents.
All business records can be found for a long time, no matter where they appear.
How do companies deal with the huge number of reviews they need to go through multiple channels?
How do they use tools like keywords (or lexicons)
Random sampling that meets regulatory requirements?
To find out, I interviewed Mitchell Atkins at a recent event.
Atkins has worked as a regulator of the financial industry (FINRA)
For more than two decades, it is now the head of FINRA's consultant FirstMark regulatory solutions
Registered brokers, financial services companies and investment consultants.
Here is the continuation of our first conversation around the challenges financial services companies face in managing electronic communications.
Joanna Beibei: Tell us what financial services companies should expect when regulators review.
Mitchell Atkins: There are two things to look forward to: the examiner will ask for 1)
Policies and procedures related to specific issues, would like to see 2)
Email, social media, and other forms of electronic communication of the object of review.
In short, the examiner will want to see your company have enough regulatory systems and make a meaningful review of communications as part of your policies and procedures.
Consequences of non-compliance?
FINRA has recently taken disciplinary action against two different companies and suspended compliance officers for failing to implement an appropriate email review.
Beibei: Do all electronic communication companies need to be reviewed?
Atkins: FINRA says you don't have to review every communication as long as you have enough process to review the sample.
You also need to do effective training to tell people what they can and can't do in terms of e-communication, including social media.
Some people forget this, but it's also part of the process.
Belbey: What other challenges do companies face in addition to establishing appropriate systems and working properly to review communications?
Atkins: The overstocked regulatory review process is a challenge.
The company struggled to review a lot of communications.
Depending on how you set the parameters, there may eventually be thousands or thousands of items that need to be viewed.
I see that the company has a backlog of 30, 40 or 60 days in the review.
This is a time bomb.
If FINRA comes in and finds something in the backlog that you should react faster, it will be listed as an aggravating factor for disciplinary action.
Also, when there is a backlog of people who are unable to view communications in a timely manner, they may not sleep well at night.
When they come in, they rush through the review process and don't concentrate enough.
In short, companies need to provide sufficient resources for those responsible for reviewing emails and other communications, otherwise the backlog could become a real problem.
Belbey: companies typically develop a dictionary and use technology to notify when certain "keywords" are used in various communications, rather than reviewing 100% of email and social communications.
These keywords can include a ban (
(Such as blasphemy)
Stock symbols, products, names of competitors, or any words that alert companies to potential problems.
Is it best practice to keep the company keywords up to date to effectively mark and supervise potentially problematic conversations?
Atkins: keyword and vocabulary management is not like the old Ronco food dehydrator commercial ad you "set it up and forget it.
Evaluating the quality of keywords and keeping your vocabulary relevant is a dynamic process.
Here are some suggestions: the development and maintenance of keywords should be an evolution.
If you put a lot of work into the process, you will create some value in your organization to gain a competitive advantage.
Is managing keywords an ongoing process?
Atkins: Yes, it definitely needs to be dynamic, it has to change, it has to be evaluated.
In fact, FINRA expects someone in your company to own the process and they will evaluate the reasonableness of these controls on a regular basis.
FINRA is also starting to look for the keywords you are using to determine if they make sense and if your process is reasonable.
Beibei: who should be involved in the keyword management process?
How do you build a dictionary together?
Atkins: you can't be an expert in everything as a compliance professional.
Because no one wants to fail, stakeholders are included in every area.
Ask different departments involved in process, law, all constituencies, IT, data security.
Make it a collaborative process.
We know that according to the FINRA regulatory rules (3310)
As long as it is a business communication in writing, there must be certain supervision.
Tell us to capture and supervise
Email content such as social media.
Atkins: The biggest challenge is to make sure you capture non-
Mail communication. Many broker-
Dealers require their registrants to conduct certification more frequently each year or sometimes, they are familiar with the company's communications policy and they know that all channels need to be captured if they are relevant to the company's business.
They also asked them to prove that they did not use any channels that were not approved or captured in the system.
I have seen some brokers.
Dealers hire interns to search social media and the Internet based on their list of registrants to confirm the accuracy of these certifications.
The other part is training.
You need to make sure that the people who work with you understand what the company's policies are and how the policies are implemented.
Beibei: Tell us more about training, especially about employees who use social media. What’s working?
Atkins: the FINRA examiner will ask you to provide evidence that you have been trained on the front end and on an ongoing basis.
When you bring a new person, start in one direction.
Say "this is our policy and we want you to prove that you have read the policy and agree to comply with it.
Here are some examples of problematic situations and acceptable situations.
Here's an example of the channel you can use and an example of the channel you can't use.
"The need for continuous training is important because social space is evolving and dynamic.
Some companies have asked social media experts to do this training at their annual compliance meetings.
Babe: What's the last idea?
As a broker
Dealer, your obligation is to make every effort to establish a reasonable regulatory system.
My personal observation, however, is that it can be difficult to get the right resources.
In addition to the company, the recent disciplinary action has begun to name compliance officers, which increases the motivation to defend the resources you need.