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Industry comparison of Connector implementation regarding regulatory expectations
Are financial institutions adapting communication capture to meet modernized regulatory recordkeeping expectations?
Email, Microsoft Teams, Slack
The use of email for business communication is well established. This is clearly shown within Global Relay’s Connector data, whereby the majority of accounts capture email communication. As referenced above, the minority of those that are not capturing email may be using in-house or provider-based solutions to meet recordkeeping requirements.
Despite being the most commonly used tool for business communication – especially with external stakeholders – business communication and collaboration platforms such as MS Teams and Slack now take precedence for internal communication. As such, there is a fast-moving adoption of Connectors for these channels, as demonstrated by Year-on-Year comparisons.
With the ongoing cultural shift towards a regulatory landscape more focused on individual conduct and the risks it can present, organizations may be using communications monitoring to identify these risks. By capturing data from communications channels and using this data as part of communications surveillance, firms can flag – and act to mitigate – conduct risks like bullying and harassment, and can work to avoid reputational and regulatory fallout, as well as remedy and/or confront the misconduct.
Alongside the evolution of channel use, financial regulators are simultaneously looking to implement regulatory changes to bring traditional frameworks up to speed with the increased digitalization of financial services and communication. For compliance teams, this means contending with change from all angles.
LinkedIn, X, Websites
The prominent capture of LinkedIn data across all four sectors of financial services is considerably higher than some might have predicted. This is especially true for Broker-Dealers, with 47% of accounts capturing LinkedIn communication data – almost triple the number of those capturing communications within MS Teams.
Investment Managers similarly show high capture rates at 36%, which is more than those capturing Instant Bloomberg (Bloomberg Chat) (23%), and almost double the number of Connector accounts capturing MS Teams (19%).
Looking more broadly, it appears that all four industry sectors are taking proactive steps to capture communications data across the majority of social media platforms. While Broker-Dealers and Investment Managers have a clear appetite to capture platforms such as LinkedIn and X, we also see a clear trend towards the capture of website data – especially by Investment Managers and Private Equity.
Social media, especially LinkedIn, has become a critical means of connecting with both customers and prospects for myriad purposes. From direct messages and customer engagement, to marketing and outbound sales and recruitment, social media is a powerful tool to connect without being limited by traditional constraints. For example, financial service employees can connect directly with prospective customers on LinkedIn, without the need for an email or contact details.
As mentioned above, Global Relay’s LinkedIn Connector – as well as other social media Connectors - allows users to capture both company profiles and individual employee accounts. Looking at the graph indicating LinkedIn capture volumes, we can see that the majority of accounts (62.9%) are opting solely to capture communications data from individual employee’s accounts. These firms see LinkedIn as a tool for internal and external business communication, and are capturing it as such.
Far fewer firms, however, are opting to capture only their company pages within LinkedIn (10.9%), while only 26.2% are capturing both employee and company pages. Given the strength of regulatory messaging surrounding marketing rules and consumer duties, it is surprising to see that so few firms are prioritizing the capture of their company pages. As these rules bed in and become part of the supervisory programs in the coming years, it will be as essential to capture marketing communication as it will be to capture sales communication. As such, firms should be considering their LinkedIn capture strategy sooner rather than later.
For more information on the Marketing Rule and other capture requirements, see: Appendix, New regulations and rules concerning recordkeeping.
The prominence of Connector accounts for social media and website capture can be directly attributed to a series of modernized regulatory initiatives made over the past five years. In particular, key developments including Regulation Best Interest, the SEC’s Marketing Rule, the FCA’s Consumer Duty, and other regulatory guidance, have all had a significant effect on the way that firms capture communication.
As well as the introduction of new rules, enforcement actions for recordkeeping failures have hit the headlines in the financial press in the last two years. Much of this activity has come from U.S. regulators, and chiefly concerned the use of WhatsApp and SMS/Text on personal devices. In particular, the Financial Industry Regulation Authority (FINRA) has issued a number of standout fines for the use of SMS/Text. While U.S. regulators have dominated the enforcement space for recordkeeping, U.K. regulators are starting to show signs of following suit, though not from the regulators that most would expect.
For more information on critical regulatory enforcements for WhatsApp, SMS/Text, and other IM channels see: Appendix, Critical regulatory enforcements for recordkeeping failures.
Despite the strength of messaging and enforcement surrounding WhatsApp, iMessage, and SMS/Text, the number of Global Relay Connector accounts opting to capture these channels remains low. It should be noted that this may be owing in part to implementation timelines rather than inactivity on behalf of compliance teams. Most regulatory enforcements have been issued within the last year, so it is likely that firms are yet to have fully onboarded a compliant solution.
Moreover, as an alternative to Connectors, some firms opt to implement policies that ban or prohibit the use of certain channels. Apple® iMessage® is one such commonly-blocked channel, chiefly because of the historical challenge firms have had in capturing iMessage data. However, as further enforcement action has shown, channel bans do not guarantee compliance.
It should be noted that accounts using Global Relay’s compliant capture solution for WhatsApp and iMessage, Global Relay App, is not reflected within this Global Relay Connector account data. However, significantly increasing user numbers of Global Relay App accounts will mean that data channels such as WhatsApp are being successfully captured, despite falling outside the scope of this Connectors-focused report.
