Compliant Use of WhatsApp: Key FINRA and SEC Regulations to Consider (Infographic)

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WhatsApp is fast becoming a tool of choice for financial advisers to support their day-to-day tasks and communication with their clients. As such, many financial services organizations have begun to understand the importance of archiving WhatsApp messages as part of compliance with the business text message archiving requirements of Financial Industry Regulation Authority (FINRA) and Securities and Exchange Commission.

However, compliance with the archiving regulations of FINRA and SEC is far more than just having the capability to capture and retain WhatsApp communications and being able to access and retrieve them upon request. FINRA has clearly defined requirements within four key sectors that financial organizations must consider when using WhatsApp in their operations: Recordkeeping, Testimonials, Suitability, and Supervision.

Compliant Use of WhatsApp - Key FINRA and SEC Regulations to Consider

1. Recordkeeping

In its April 2017 Regulatory Notice, FINRA clarified that financial institutions under its authority must have a way to retain the records of employees from all messages sent from any platform on their mobile devices.

Financial firms allowing their employees to use WhatsApp cannot just rely on the app itself to retain business-related communication for them. It is imperative to invest in an enterprise-grade mobile archiving solution that can capture and recordbusiness-related conversations in WhatsApp with easy and quick access to the records, especially for an SEC compliance audit.

2. Testimonials

The Investment Advisers Act of 1940 is a U.S. federal law which defines the roles and responsibilities of a registered investment adviser (RIA). Under Rule 206(4)-1(a)(1), RIAs are prohibited from using testimonials in their investment advisory advertisements. As such, the SEC expects firms to ensure that their RIAs will not be involved in using WhatsApp to create and use “favorable” testimonials or share positive testimonials to their contact lists.

3. Suitability

The FINRA Rule 2090 “Know Your Customer” essentially states that financial advisers must know the “essential facts” concerning every customer before offering any investment advice. Along with this rule is the FINRA Rule 2111, which prohibits firms from providing investing recommendations for specific products or general investing recommendations, such as “buy”, “sell”, “hold” – unless they have a “reasonable basis to believe that a recommended transaction or investment strategy involving a security or securities is suitable for the customer…”

Therefore, it is important for financial firms and their associated persons to ensure that they do not immediately pitch products or give any general investing recommendations to anyone who just has reached them via WhatsApp – unless they confirm that the person is an existing client and the advisor has a reasonable basis to believe that the recommendation is suitable for that customer.

4. Supervision

The last but definitely not the least regulatory area that financial organizations in the U.S. must comply with is the supervision of retained electronic communications such as WhatsApp chats.

Aside from having a Written Supervisory Procedures regulating the use of mobile devices in their workplace, firms also need to have a solution in place that can prove that they are monitoring and supervising all the business-related communications of their financial advisers to ensure that they are adhering to industry rules and regulations.

The lack of supervisory controls around your WhatsApp communication scan lead to significant fines and penalties, as highlighted in some of the most prominent disciplinary actions taken by FINRA in the first half of 2018.

TeleMessage’s WhatsApp Archiver is a unique platform tailor-made to solve compliance and regulation issues by allowing financial firms to capture and archive WhatsApp messages. This platform works exactly like the standard WhatsApp application, ensuring that your employees will still be able to send work-related communications easily and quickly.

The benefits of using WhatsApp Archiver in your business include:

  • Archive all WhatsApp communications
  • Use WhatsApp to communicate with customers, employees, and stakeholders
  • Search, track and retrieve WhatsApp messages in the corporate archive
  • Deposit WhatsApp messages with any email archiving vendor
  • Full administration and reporting

The TeleMessage WhatsApp Archiver is the latest addition to our mobile archiving products that 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 requirements:

TeleMessage offers cross-carrier and international mobile text & calls archiving for corporate and BYOD phones. Contact us today to try our mobile archiving products.

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