The SEC’s Review of Personal Phones for Business Communications

A recent Bloomberg report revealing that the SEC has required more than 100 Wall Street employees and executives to hand over their personal cell phones has sent shock waves through the financial services industry.

However, regulations for text messaging are not new. In 2007, regulatory fines for communications expanded to IM and text message. FINRA issued Regulatory Notice 07-59 noting that the context of the message (e.g., the content of the message, the timing, the audience), rather than the electronic form by which it’s transmitted, classifies it as business communication. Yet many firms are still failing to either allow or adequately supervise, the use of text and other mobile messaging for business communications.

Regulators have continued to reinforce the role that communications play in their ability to adequately examine financial service companies. In October of 2021 the Director of Enforcement, Gubir Grewal, stated that these failures not only delay and obstruct investigations, but they raise broader accountability, integrity and spoliation issues.

The hard truth is that business communications in financial services are neither personal nor private. The SEC has demonstrated that they can and will ask for personal devices if they intend to perform an inspection. Firms must make sure they have the right processes and technology in place to establish, maintain, and enforce supervisory systems for all business communications, whether internal or external, in case of regulatory or legal review.