US financial regulators – what are the differences among CFTC, NFA, FINRA, and SEC?

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The US has one of the world’s most heavily regulated financial markets.

Numerous federal and self-regulatory agencies work in tandem, intending to promote transparency and efficiency in the markets. These regulators have a bird’s eye view of the entire market, including futures, options, stocks, bonds, commodities, and forex.

Along with observing the trades and significant decisions of all the stock brokers, bankers, dealers, insurance agents, etc., who work in the industry, these agencies also conduct investigations into the internal functioning of financial firms.

For such cases, mobile and other electronic communication, a key source of truth, must be preserved and maintained for a specific period by all regulated firms. Failing to do so or having employees use private, unsecured BYOD phones, networks, social media accounts, or emails to interact with clients can lead to huge fines from the regulators.

So, it is mission-critical for financial firms to have in place an archiving solution to help with regulator investigations, e-discovery during trials, and even audits.

While most regulators have overlapping requirements regarding call recording and text message retention, some key differences exist between what each agency mandates, depending on the financial instrument, market, and professionals involved.

Types of US Financial Regulators

Among the range of financial regulators, the SEC, CFTC, FINRA, and NFA are the principal regulatory bodies overseeing the US securities markets. They have the power and authority to control registered financial institutions to fulfill major regulatory objectives. One of their primary objectives is to ensure that financial market participants are confident about its integrity and that markets operate efficiently with maximum buyers and sellers, liquidity, reduced costs, and volatility.

Many other regulators regulate distinct financial markets in the USA. Following is the list of regulators that regulate each financial market sector.

Banking Regulators

Securities Regulators

Other Regulators

US Federal government agencies

The Commodity Futures Trading Commission (CFTC)

Since its establishment in 1974, the Commodity Futures Trading Commission has functioned as an independent agency regulating the US derivatives market.

The agency ensures that swaps, futures contracts, forex, and options are traded in the market without fraud or manipulation.

To stabilize the financial markets, the CFTC has introduced the Dodd-Frank Act, which requires companies operating in the swaps market to perform call recording and retain other forms of audio communication via email, telephone, and voicemail.

The Securities and Exchange Commission (SEC)

As a federal government agency, the SEC wields immense power in regulating the US securities market.

Since its creation in 1934, the agency has been tasked with creating and enforcing compliance requirements for stock and options exchanges, investment advisors, and the securities market in general. It is especially noteworthy that the SEC has stringent broker-dealer recordkeeping rules. Major banks and stock broking companies have received multi-million-dollar fines and license cancellations because they violated agency compliance requirements.

SEC Rules 17a-3 and 17a-4 are among the most crucial requirements that broker-dealers have to adhere to, and rules like this mandate that the companies retain all electronic communication for no less than six years. Importantly, the records must be time-stamped with a unique, sequential identification number and adequately indexed. Duplicates are also to be stored separately from the original copies. In addition, the SEC recordkeeping rules require companies to archive communication that involves the public, such as sales scripts, audio and visual records, social media records, and even marketing material.

Self-regulatory organizations (SRO)

The National Futures Association (NFA)

The National Futures Association, a self-regulatory organization,  is one of the primary regulators of the US futures and derivatives markets. Established by the Commodity Futures Trading Commission as an independent and non-profit regulatory body, it is tasked with safeguarding investors in the derivatives markets.

The regulatory body ensures that all its members and firms undertaking business with the derivatives market meet compliance requirements by actively surveilling the market for illicit trades. They also enforce rules, such as Compliance Rule 2-9, which require NFA members and associates to monitor their employees’ and agents’ electronic communications. Notably, the member firms must employ SMS archiving and call monitoring, along with the supervision of emails and instant messages.

The Financial Industry Regulatory Authority (FINRA)

FINRA operates under the regulations of the SEC as an independent non-profit. Established in 2007, it regulates broker-dealers in the US and safeguards the investing public.

To guarantee market transparency and protect investors from harmful practices, the agency has comprehensive mobile archiving rules, including FINRA Rule 4511 and ones based on SEC Rules 17a-3 and 17a-4. Per these regulations, FINRA constantly looks for firms violating social media and other business communication archiving requirements. It is worth noting that FINRA rules are also quite clear on BYOD use in the regulated firms, mandating that SMS, MMS, voice calls, WhatsApp, WeChat, Telegram, etc., conversations be retained for a specified period. Aside from that, the agency has policies to be followed while employees of stock broking companies work remotely to ensure the integrity of client data and prevent securities fraud.

TeleMessage capabilities to ensure maximum compliance with US financial regulators

The US financial regulators SEC, FINRA, CFTC, and NFA require regulated firms to monitor and archive all electronic communications, including instant messaging solutions, according to their various mobile compliance requirements.

TeleMessage Mobile Archiver lets organizations capture voice calls and monitor text messages from different platforms. It is a secure enterprise archiving solution with various security mechanisms, including end-to-end encryption, message self-destruct, remote data lock, and wipes. It has been designed to meet the compliance requirements of different regulatory bodies, including FINRA, SEC, CFTC, and many more.

The Difference between SEC, CFTC, FINRA, and NFA

SECCFTCFINRANFA
A federal government agencyA federal government agencyIndependent, non-profit, and self-regulatory organization (SRO)Independent, non-profit, and self-regulatory organization (SRO)
Regulates the securities marketRegulates derivatives markets. This includes:

● Swaps markets

● Commodity futures

●  Forex/commodity/futures options

● All intermediaries that work as agents for others when working with futures, swaps, and options

Regulates broker-dealers

 

Oversees all U.S.  stockbrokers and brokerage firms.

 

 

Regulate futures and derivatives market participants
Regulates and oversees FINRARequire registered firms to be NFA membersOperates under the regulation of the SEC
Main Responsibilities include

 

● Protecting Investors

● Facilitating capital formation

● Maintaining fair, orderly.
Efficient markets

 

Main Responsibilities include

 

● Preventing financial fraud, market manipulation, and other malpractices related to the derivatives market and other products that are related to the Commodity Exchange Act.

Main Responsibilities include

● Writing rules related to ethical activities of all registered broker-dealer firms and brokers

● Monitoring firms for compliance and carrying out enforcement activities for violations of the rules;

● Encourage market transparency

● Provide investors with the required knowledge about the rules

Main responsibilities include

● Regulate futures and derivatives markets

● Registering firms who intend to do business with derivative markets

● Prevent financial fraud and abuse in the futures markets

● Strong enforcement activities for violations of the rules

● Real-time market surveillance

Electronic record-keeping rules:

 

SEC Rules 17a-3 and 17a-4

Electronic record-keeping rules:

 

Based on the Dodd-Frank act’s call recording regulations, companies related to the swaps market must record all audio communications through email, telephone, voicemail, and many others

Electronic record-keeping rules:

● Mobile archiving requirements are based on SEC Rules 17a-3 and 17a-4

● FINRA retention requirements – FINRA Rule 4511

● FINRA’s guidance on social media usage and business communications describe how businesses need to act when using social media sites and BYOD for business communications

● Regulatory notices on remote work and supervision

Electronic record-keeping rules:

 

 

● NFA mobile compliance requirements

 

● NFA call monitoring and text message recording requirements

TeleMessage Value Addition for US Financial Regulations

The US financial regulators SEC, FINRA, CFTC, and NFA require regulated firms to monitor, and archive all the electronic communications including instant messaging solutions according to their various mobile compliance requirements.

TeleMessage Mobile Archiver allows organizations to capture voice calls and monitor text messages exchange through different platforms. It is a secure enterprise archiving solution that consists of different security mechanisms such as end-to-end encryption, message self-destruct, remote data lock, and wipes. It has been designed to meet the compliance requirements of various regulatory bodies, including FINRA, SEC, CFTC, and many more.

About TeleMessage

TeleMessage offers employees the freedom to use modern messaging applications on the mobile and desktop. Our mobile archiving products securely record content from mobile carriers and mobile devices, letting companies meet recordkeeping regulations and compliance requirements.

With multiple archiving solutions, you can always find the right tools or blend for your requirements:

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

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