Importance of Financial Regulation: Text Message Archiving in 2022

Did you know that your text messages are a valuable source of information for financial regulators? During one investigation this year, the SEC searched through more than 100 cellphones used by bankers and traders on Wall Street. This is just one of the many reminders of the importance of financial regulation text message archiving for 2022.

Communicating Via Text Messaging Does Introduce Risks

While the benefits of text messaging are significant, communicating via text messaging can introduce compliance concerns. It can quickly become informal and does not have the encryption level that instant messaging offers. In addition, if you lose your phone, your messages could fall into the wrong hands. You can counter this by using a text messaging service that offers security features, such as encryption and password protection.

There Are Several Financial Regulations for Archiving Communications

Financial institutions are among the most highly regulated industries in America. However, any industry could face a new financial regulation for text message archiving, such as due to payment processing or protecting credit card data. Consider the five main regulations affecting financial companies.

1. Financial Industry Regulatory Authority

FINRA sets the standard for the securities industry by regulating firms that sell stocks, bonds, and other investments. The organization aims to protect investors from fraud and ensure that the markets operate fairly.

One of the main ways FINRA does this is by establishing rules that firms must follow when communicating with clients. FINRA rules on text messaging and other compliance matters affect the following:

• Capital acquisition firms
• Broker-dealer firms
• Funding portals

2. Sarbanes-Oxley Act

The Sarbanes-Oxley Act includes a section on record-keeping. It requires companies to keep accurate business communications records, including email and text messages.

The Sarbanes-Oxley Act applies to any company with a publically traded security. Nearly every bank and financial institution in America is subject to these rules. Consequently, all publicly traded companies need an SMS archiving solution.

Generally speaking, it requires retaining accurate business records for up to seven years. These records include digital correspondences, such as financial advisor texting.

3. Dodd-Frank Wall Street Reform and Consumer Protection Act

The Dodd-Frank Wall Street Reform and Consumer Protection Act introduced sweeping changes to regulations in the financial industry. One of the most important provisions is the requirement that banks retain records of all customer communications, including text messages. These and other provisions of the law affect Swap Dealers.

Consider the following requirements:

• Affected entities must retain transactional records, including SMS, fax, email, and chats histories.
• Affected entities must keep all data related to activities before, during, and after a trade.
• Retention time differs across types of transactions and records, such as the life of the swap or five years.

4. Federal Acquisitions Regulations

The FAR sets the rules for how the government can buy goods and services from contractors. This includes setting standards for communication between government employees and contractors. The regulations require companies to preserve communications in an accessible format. 

FAR requires the preservation of hard and electronic copies for two to four years. It doesn’t specifically mention text messages, but they fall under the category of electronic communications that need to be archived.

5. Gramm-Leach Bliley Act

The Gramm-Leach Bliley Act includes a section on safeguarding customer information, which requires measures to protect customer data from theft or fraud. It applies to any company that offers financial products or services. That includes banks, credit unions, investment firms, and insurance companies.

Under the law, financial institutions must also provide customers with a notice of their privacy rights. To comply with the law, you need to have a SMS archiving solution.

Failure To Ensure Compliant Text Messaging Is Expensive

If you’re subject to any of the mentioned laws or regulations, you could face fines for failing to ensure instant or text message compliance. The SEC, CFTC, and OCC have also imposed multimillion-dollar penalties on companies that have violated record-keeping provisions and other compliance objectives. One of the most commonly cited examples is the $200 million fine levied against JPMorgan.

So, what can you do to ensure you remain compliant and to reduce data privacy risks? Consider the following:

• Use a text message archiving solution that is compliant with all relevant regulations.
• Stay up to date on changes to the law and ensure your solution evolves to meet new requirements.
• Educate employees on compliance risks and best practices for using SMS in the workplace.
• Research different communication methods and evaluate their specific risks before allowing their use at work.

LeapXpert Can Help You Reduce Communication Compliance Risks

LeapXpert provides a secure and compliant responsible business communication solution that can help you meet all the requirements of the laws and regulations affecting your business. We also make the integration process simple so that you can focus on your business operations.

Are you ready to protect your business from communication-related compliance risks? Contact us to get started.