EXCLUSIVE U.S. SEC opens inquiry into Wall Street banks’ staff communications -sources

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WASHINGTON, Oct. 12 (Reuters) – The US Securities and Exchange Commission has launched a full investigation into how Wall Street banks track their employees’ digital communications, three people familiar with the matter told Reuters.

SEC enforcement officials have contacted several banks over the past few weeks to verify that they have adequately documented employee work-related communications such as text messages and emails focusing on their personal devices, the people said on condition of anonymity languages ​​.

The industry “sweep” is yet another sign that the SEC, under its Democratic leadership, is stepping up enforcement, underscoring the challenges Wall Street banks face in employee communication in the pandemic-era work from to Home to keep an eye on.

The SEC conducts regular sweeps to quickly gather information about problems it suspects are widespread. Sweeps can sometimes, but not necessarily, lead to formal probes.

The search appears to come from an investigation the agency has been conducting against a single financial institution for some time, two of the sources said, without naming the company.

In August, JPMorgan Chase & Co (JPM.N) announced that it had made government inquiries regarding its “compliance with record-keeping requirements associated with business communications sent over electronic messaging channels” that the bank had not approved. It said it was discussing a “resolution” with regulators without specifying which.

SEC and JPMorgan spokesmen declined to comment.

The SEC and the Financial Industry Regulatory Authority, Wall Street’s self-regulatory authority, require broker-dealers to keep records of all business-related communications. Banks have to walk a fine line to meet these requirements without violating employee privacy, one of the sources said.

In the United States, there is no clear legal basis on which an employer can request to see their employees’ personal communications, while in other countries doing so may violate privacy laws, the source said.

As a result, many financial firms are banning the use of personal email, text, and other social media channels for work purposes, but keeping up with the proliferation of communication apps – especially during the pandemic – is a challenge for businesses.

In a speech last week, Gurbir Grewal, director of the SEC’s enforcement department, warned that institutions should keep an eye on the many “problems posed by the increased use of personal devices, new channels of communication and other technological developments.”

Failure to maintain and submit communications records may hinder regulatory investigations, Grewal said in the notes.

Last year, Morgan Stanley (MS.N) fired two top managers for illicit use of WhatsApp to discuss work matters.

Editing by Michelle Price and Nick Zieminski

Jody Godoy

Jody Godoy reports on banking and securities law. Reach her at jody.godoy@thomsonreuters.com