Both the Securities and Exchange Commission (SEC) and Financial Industry Regulatory Authority (FINRA) issue, implement and enforce mobile archiving compliance standards and requirements in the U.S. financial sector.
However, despite their seemingly similar approach in regulating financial organizations, individual broker-dealers, and investment advisors, their mobile, text, and voice call archiving standards vary in several key characteristics, and their enforcement power and scope of jurisdiction slightly differ in some ways as well.
Read on as we discuss in this infographic the key distinctions between SEC and FINRA as leading regulators in the U.S. financial industry, as well as the differences between their mobile and text archiving requirements.
Securities and Exchange Commission
Date Established: June 6, 1934
Origin: Securities Exchange Act of 1934
Enforcement Power: Investigate violations of the securities laws and regulations and bring actions against alleged violators.
Scope of Authority: Broker-dealers, Registered Investment Advisers
Objective: Protect the investors, maintain fair, orderly, and efficient markets, and facilitate capital formation.
Notable Enforced Laws and Statutes: Securities Act of 1933, Trust Indenture Act of 1939, Investment Company Act of 1940, Investment Advisers Act of 1940, Sarbanes-Oxley Act of 2002, and Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.
The U.S. SEC is the chief federal agency that enforces securities laws, proposes securities rules, and regulates the nation’s stock and options exchanges. While the SEC does not have criminal authority, it may refer matters to state and federal prosecutors. It also oversees self-regulatory organizations (SRO), including FINRA.
The Office of Compliance, Inspections, and Examinations (OCIE) is SEC’s office which inspects broker-dealers, stock exchanges, credit rating agencies, registered investment companies, including both closed-end and open-end (mutual funds) investment companies, money funds, and Registered Investment Advisors (RIAs).
The same office also oversees the compliance of the broker-dealers with SEC’s mobile SMS archiving requirements, which are detailed in SEC Rule 17a-3 and 17a-4. The OCIE also oversees the compliance of other organizations, including RIAs to other mobile archiving laws and regulations, such as the Rule 204-2 of the Investment Advisors Act and Sarbanes-Oxley Act.
In December 2018, SEC OCIE released the Implementation Recommendations and Guidelines for Mobile Archiving, which mandates firms to minimize the risks of electronic messaging by adopting policies and systems that will them to capture and record “…written business communications conveyed electronically using, for example, text/SMS messaging, instant messaging, personal email, and personal or private messaging. … communications when conducted on the adviser’s systems or third-party applications (“apps”) or platforms or sent using the adviser’s computers, mobile devices issued by advisory firms, or personally owned computers or mobile devices used by the adviser’s personnel for the adviser’s business.”
Financial Industry Regulatory Authority
Date Formed: July 30, 2007
Origin: Consolidation of National Association of Securities Dealers and regulation, enforcement, and arbitration operations of the New York Stock Exchange.
Enforcement Power: Observe broker-dealers’ operations and conduct examinations to ensure compliance and bring disciplinary actions in response to rule violations.
Scope of Authority: All registered broker-dealer firms and registered brokers in the U.S.
Objective: Ensure the Broker-Dealer industry operates fairly and honestly and educate investors.
Formerly known as National Association of Securities Dealers (NASD), FINRA is a self-regulatory organization, which means that it only enforces its policies (that is based on SEC regulations and federal laws) to its member brokers and firms. All broker-dealers must be licensed by FINRA before they can operate.
Majority of FINRA’s mobile archiving requirements are based on SEC’s broker-dealer recordkeeping standards. As derived from SEC Rule 17a-3 and 17a-4, the FINRA Rule 4511 and subsequent Regulatory Notice 17-18 states the need for member brokers and firms to archive mobile communications, especially text messages sent from any platform on their mobile devices.
In conclusion, FINRA is the main organization that specifically monitors and regulates stockbrokers and brokerage firms. On the other hand, the SEC is the primary overseer of the U.S. securities markets and several other agencies, and has a broader reach and scope, focuses on maintaining fairness for investors.
Regardless of the differences in jurisdiction and authority, SEC and FINRA both have the capacity to penalize financial organizations and stockbrokers that breach their mobile archiving requirements. To minimize exposure to hefty fines, penalties, and non-compliance charges from SEC and FINRA, an enterprise mobile messaging solution that can capture and record mobile SMS, record voice calls, archive WhatsApp chats, and other mobile conversations in real-time is warranted.
The TeleMessage Mobile Archiver effectively addresses compliance, regulatory, eDiscovery response requirements and reduces risk across a variety of the financial sector. TeleMessage captures and records mobile content, including SMS, MMS, voice calls, social media, and WhatsApp Chats from corporate or BYOD mobile phones. Messages are securely and reliably retained within TeleMessage servers or forwarded to an archiving data storage vendor of your choice.
Our mobile archiving products securely capture content from mobile carriers and mobile devices for a variety of ownership models (BYOD, CYOD, and employer-issued). With our multiple archiving methods, you can always find the right tools or blend for your text message archiving and voice call recording requirements:
TeleMessage offers cross-carrier and international mobile text and calls archiving for Corporate and BYOD phones. Visit our website today at www.telemessage.com to learn more about how we can help your organization stay compliant with SEC and FINRA text archiving regulations.
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