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The Practice Of Law Is A Relationship Business

Are your communication policies in compliance with regulations?

by | May 12, 2022 | Securities Litigation

Whether you are a broker-dealer or work for a publicly-traded company, the way in which you communicate about official business matters makes a difference. Lapses in communication security can result in investigations by the SEC, FINRA and other regulatory bodies. By implementing sound policies, you can avoid the costly pitfalls other companies have recently fallen into.

The heavy cost of violations

In a notable case last year, JP Morgan Chase & Co. was fined $200 million for communication and recordkeeping violations. Employees at the firm were communicating about customer accounts and other sensitive information over text messages, messaging apps and other unconventional methods.

Under SEC Books and Records Rules, companies must keep comprehensive records regarding such communications. When employees use novel technologies to discuss official business, the exchanges can fall between the cracks of proper recordkeeping procedures.

“Since the 1930s, record-keeping and books-and-records obligations have been an essential part of market integrity,” said SEC Chair Gary Gensler. “Unfortunately, in the past we’ve seen violations in the financial markets that were committed using unofficial communications channels.”

The proliferation of communication technologies has heightened the compliance challenges companies face. With every new email or instant message app that finds mass adoption, the risk of employees using these technologies for official business grows.

The value of proactive planning

Wall Street firms got the message last fall when the SEC signaled an aggressive inquiry into recordkeeping processes was forthcoming. Business leaders across the country would be wise to proactively address this issue before it becomes a costly legal problem. Some firms have had to dig through volumes of exchanges to maintain compliance with regulations. In light of the enormous fines and penalties that apply, such measures are more than worthwhile.

With sound policies and procedures in place, you can avoid the costly consequences of communication violations. If you detect a lapse in your record-keeping or have reason to believe you are already under investigation, a strong legal response can help you avoid lasting damage.



Commercial LitigationSecurities LitigationAre your communication policies in compliance with regulations?
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