Cyber-Security, Comms Trump Text and Social for Compliance Officers

1 - Cyber-Security, Comms Trump Text and Social for Compliance Officers
2 - Social Networks Posed Challenges in the Past
3 - Compliance Is More Open to Communication Across Social Networks
4 - Many Firms Don't Have Tech to Archive/Supervise Social Channels
5 - BYOD at Mass Acceptance
6 - Text Messaging Gap Still Alarms
7 - Message Supervision Delivers Business Insight, Helps Identify Risk
8 - Requests for Data Production From the Archive
9 - Cyber-Security Looms Large for Compliance Officers
10 - Message Supervision Is More Proactive Today
11 - Compliance Officers Face Challenges When Asked to Produce Data
12 - Good Archiving Platforms Are Critical to Effective Compliance
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Cyber-Security, Comms Trump Text and Social for Compliance Officers

by Darryl K. Taft

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Social Networks Posed Challenges in the Past

The success of financial advisors can hinge on how effectively they communicate with clients. These conversations often take place outside the office and over channels other than email. For example, today's advisors reach clients through LinkedIn or Twitter, among other channels, and often from a mobile device. In the past, compliance officers approached new communications channels with trepidation. If compliance couldn't retain and review communication through a given channel, a customary practice of firms was to simply prohibit its use. For example, in 2011, just 39 percent of respondents allowed LinkedIn, compared with 72 percent today. As a result, compliance was often perceived as a barrier to marketing innovation.

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Compliance Is More Open to Communication Across Social Networks

The Smarsh survey shows that compliance officers have moved away from fearing the potential threat from digital channels. But the shift from fear to flexibility didn't happen overnight. Since the inception of this survey in 2011, compliance officers have been steadily moving from prohibition to permission. Since 2011, LinkedIn has the greatest increase in allowed usage, at 33 percent, closely followed by Twitter and, then, Facebook.

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Many Firms Don't Have Tech to Archive/Supervise Social Channels

In 2011, only 17 percent of firms archived at least one network among LinkedIn, Facebook or Twitter. The next year, that grew to an average of 30 percent archiving at least one channel, and today, it's at 61 percent. While the growth in policy and enforcement technology is trending in the right direction, a compliance gap still remains. An average of 39 percent of respondents that allow social channels do not have an archiving/supervision solution in place for social media.

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BYOD at Mass Acceptance

Social media isn't the only place where firms are becoming more flexible around advisor needs. This year, allowance of personal devices for business communications is up 17 percent from last year, and 73 percent of respondents have a policy about BYOD, compared with 58 percent last year.

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Text Messaging Gap Still Alarms

Last year, survey responses indicated that the use of text messaging for business communications represented a significant compliance vulnerability. More than two-thirds of firms that allowed text messaging did not have a solution in place for retention and oversight, and unsurprisingly, nearly 60 percent of those that allowed text messaging had minimal or no confidence in their ability to produce messages if requested. The compliance gap—the number of firms that allow text messaging for business communications but don't have a system in place for retention/supervision—is still at an alarming 64 percent.

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Message Supervision Delivers Business Insight, Helps Identify Risk

Electronic communications oversight is no longer just a checkbox need-to-have for compliance professionals. As electronic messaging channels have gained more prominence in business communications, firms are recognizing the value of this archived data, and message supervision presents a huge opportunity to identify risk within an organization. Seventy-two percent of respondents now believe message supervision is a critical tool to identify real risk in their organization, up 13 percent from last year, and 81 percent believe message supervision delivers valuable and actionable insights to the business, versus 65 percent last year.

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Requests for Data Production From the Archive

Requests for data production from the archive are rising, and the reasons are growing. Outside of a regulatory audit, litigation and e-discovery, requests are the No. 1 reason digital communications data is leveraged, and 64 percent of respondents note that the compliance department is typically responsible for all noncompliance-related requests. Instances of seven or more such requests have risen by 16 percent since 2011.

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Cyber-Security Looms Large for Compliance Officers

Over the past year, as FINRA (Financial Industry Regulatory Authority) and the SEC both issued guidance on the need to address cyber-security risk and preparedness, compliance continued to evolve its role in helping companies prepare for threats and develop plans to deal with an attack. In the past year, 83 percent of respondents participated in conversations about risks related to cyber-security, and 58 percent expect their role to change as a result of managing such risks.

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Message Supervision Is More Proactive Today

The shift in compliance professionals' top concerns shows that their message supervision is moving from being reactive to proactive. In 2015, as in 2011, new and changing regulations and increased scrutiny and enforcement by regulators remained among their top four concerns. But this year, balancing employee privacy considerations with oversight obligations and cyber-security threats posed by the use of electronic messaging platforms surfaced as top priorities.

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Compliance Officers Face Challenges When Asked to Produce Data

The production of data upon request, including electronic communications, is an area of concern for regulators. The Smarsh survey uncovered factors interfering with firms' ability to produce electronic communications data within a reasonable time. The No. 1 problem is the multiplicity of platforms used to retain this data. Compliance officers often deal with multiple digital channels and often multiple solutions for archiving/supervision, and this complexity is compounded by a general lack of understanding of the technology and limited staff resources.

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Good Archiving Platforms Are Critical to Effective Compliance

As compliance officers look to close the gaps with electronic communications, they may want to consider those attributes in an archiving solution that have been cited as "important to critically important" in developing a comprehensive electronic message compliance program. These include ease of use, support for new communication channels and having a single platform for searches across channels.

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