Regulatory Compliance

FCA Market Watch: Firms must plug risk from reduced monitoring and WhatsApp

Marketing

Marketing

14 Jan, 2021

The latest FCA Market Watch newsletter has set out their increased expectations for firms recording telephone conversations while operating in alternative working arrangements. 

 

This week, the FCA (Financial Conduct Authority) published their Market Watch 66 newsletter, focusing on their expectations for recording in alternative working arrangements, namely the risk remote working poses to regulated firms, and the use of emerging communications channels such as WhatsApp.

 

VoxSmart has touched on both topics during recent months but this is the first clear message from the UK Regulator addressing the risks, which are likely to be long-lasting.

 

Due to the recent shift to home working, clients and employees alike have turned to non-conventional communication measures to ensure business continuity. Tools such as WhatsApp have helped ensure global businesses remain active and competitive during these challenging times.

 

“Firms will need to ensure that, if such apps are used for in-scope activities on business devices, they are recorded and auditable."

 

In the newsletter, the FCA highlight they have previously penalised individuals who have used WhatsApp for misconduct such as arranging deals or providing investment advice. The fact that social media platforms are far more prevalent and accessible while working from home means these channels are likely to be used for in-scope activity and should be considered as part of a firms risk management program from now on.

 

“It is important for firms to proactively review their recording policies and procedures every time the context and environment they operate in changes. We expect firms to have a rigorous monitoring regime, commensurate to the increased risks, where in-scope activities may be conducted outside the controlled office environment.”

 

The need for effective and up to date recording policies was also touched on in this months’ notice as well as the expectation firms are keeping up with their employee training as conduct policies are enhanced and refreshed.

We’ve seen recent examples where circumventing current recording rules have resulted in significant fines for market misconduct. In October last year, we saw two senior commodities traders lose jobs over WhatsApp use, which is evidence that Instant Messaging use is widespread among Wall Street institutions and across the global economy.

 

In a fast-moving market where high volatility has been characteristic of recent months, WhatsApp has evolved into an easy to use and convenient tool to quickly communicate with clients across the globe.

 

At VoxSmart we are pleased to see the Regulator formalising their standpoint on the evolving communications landscape and how firms should be approaching the use of emerging channels like WhatsApp. We have always believed that enabling employees with the tools to better serve their customers is always more beneficial for a business than restricting their use.

 

We expect monitoring WhatsApp to remain an area of focus for the UK Regulator and others globally for the short to medium-term, something that FinTech providers like ourselves are able to address for regulated organisations.  

The Regulator also took the opportunity to remind firms of their obligations to meet the Senior Management Arrangements, Systems and Controls sourcebook (SYSC 10A), which remains unchanged throughout the pandemic.

 

The announcement comes as the World Bank and Cambridge Centre for Alternative Finance published their Global COVID-19 FinTech Regulatory Rapid Assessment Study, finding that COVID-19 has only served to push fintech up the agenda for regulators across the world.

 

Read in full the FCA’s Market Watch 66.

 

 

We have gathered six months of capital markets communication data and produced a high-level report highlighting some of the key insights and trends we have witnessed unfold since the start of the global pandemic.       download now.

VoxSmart-Communications-Trends

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Topics: Regulatory Compliance, WhatsApp