Compliance Struggles with Brokerage, Sales, and Traders

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The struggle for maintaining regulatory compliance is always a game of tug of war between the compliance team and, the brokers and traders. The focus of the compliance team in a financial firm is to make sure that all their employees have a strict adherence to the company policies. These policies are framed to meet the expectations of financial regulators such as the SEC, FINRA, FCA, IIROC, MAS, etc.

The policies framed by financial regulators are very strict to protect the best interests of investors, and also to cap any sort of malpractice during the trades. But these regulations are so hardbound that putting them into action is a triumph.

Compliance teams and brokers have different views when it comes to business. Brokers will be keen on driving the business forward. In the pursuit of achieving a good business, brokers will usually be negligent of the path in which they travel. This does not imply that they purposefully support trade malpractices.

Compliance managers on the other hand will put their best effort into making the workplace and the workers compliant with the regulatory norms. They know well that any sort of deviation from the regulations could put the entire organization on a spike. The result will be hefty fines from regulators and loss of reputation.

One of the main compliance issues that financial firms face is the use of Mobile Instant Messaging (IM) applications. While brokers are eager to use applications such as WhatsApp, WeChat, Signal, and others for business communication, the compliance teams will be reluctant to approve such requests, considering the risks associated with it.

The evolution of communication trends

In his Theory of Evolution, the father of evolution Charles Darwin explains how humans have survived and evolved over the course of time. On close observation, we can understand that it was not merely the ability to think and communicate that allowed humans to evolve, but also the ability to make wise decisions.

Even though this theory was initially formulated based on living organisms, the idea is equally applicable to anything and everything today. Even while considering a business, you can see that the ones that were quick to adapt to changing mobile and social trends managed to survive over the years. And the ones that couldn’t possibly identify the changes and adapt accordingly were either crippled or had to leave the space entirely.

Now you may relate this with the use of Mobile IM applications such as WhatsApp, WeChat, Signal, Telegram, and many others. When compared with conventional modes of communication like emails and calls, the communication experience through these IM applications is smooth as butter. Hence, failing to tap the full potential of IM applications in business communication could be similar to a caveman throwing fire away as he does not understand how that fire could put him at an advantage over others.

With more than 2 billion monthly active users WhatsApp is the most preferred IM application worldwide. More than 1 billion people use WeChat every month for their messaging solutions and this makes WeChat the number one chat application in China. And other messaging apps such as Telegram and Signal have hundreds of millions of users as well. These numbers show us the ability of messaging applications in binding people together.

If a client prefers trade-related communications through WhatsApp and if the broker’s firm does not allow it, then it could ward off the client. The client may find another firm that could offer simpler ways of communication. So firms that allow the use of IM applications may have an upper hand over other firms.

Using applications like WhatsApp or WeChat in business communication is a natural evolution that brings reach, simplicity, efficiency, and new ways of doing business to interactions similar to the use of fire by our ancient ancestors. If not dealt with care, you can end up with a burn.

Suppose a situation occurs where the regulator identified trade malpractice through a Mobile IM application. Even though the firm was unaware of the broker’s actions the firm could also be placed accountable. Hence these applications must be allowed carefully.

We may also look into the views of the compliance team and brokers on the adherence of regulatory compliance in business.

Salespeople say that compliance teams are always on the look for what could go wrong and hence they are blind to see the positive side of the picture. Brokers also say that without a certain degree of freedom client relations may become bitter. 54% of people in a recent survey confirm that frequent communication is a critical factor for a successful business. The same survey shows that 58% of advisors view the loss of their clients to be the failure of meeting communication expectations.

Compliance managers say that they are always on the tails of brokers or traders to get things done in a compliant way. The compliance team constantly has to remind the brokers of the current financial regulations so that they do not get dragged into illegal trading. Compliance teams say that even to get a simple form to get signed from the broker, they would have to follow up multiple times. This is usually because brokers do not feel the importance of such matters and are always keen on getting the business done.

The stand-off between the compliance teams and brokers can be put to an end only if the brokers are allowed simpler ways of communication. If compliance teams decide to adopt the use of IM applications in the firms, then they must also ensure that all these conversations are recorded and archived. These conversations must be made available if requested during an audit.

The ephemeral feature of messaging applications is the serpent that compliance managers always fear. Applications that support this feature allow users to send self-destructive messages that are automatically deleted after a certain period. Users also have the freedom to delete messages that are both sent and received. Once deleted, these messages will be entirely removed from the chat history and no copy will be made available.

Hence while using WhatsApp or WeChat compliance teams must ensure that adequate measures and policies are in place to monitor phone calls and also to monitor text messages through these applications. Only then secure instant messaging can be ensured.

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TeleMessage offers cross-carrier and international mobile text & calls archiving for corporate and BYOD phones. Visit our website at to learn more about our mobile archiving products.

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