The U.S. Securities and Exchange Commission (SEC) imposed new regulations late last month on private investment pools, also known as hedge funds. The ruling requires that most hedge fund advisers register with the SEC under the Investment Advisers Act of 1940, which includes provisions for securing, managing and archiving all electronic communication, including instant messages.
The use of IM in financial trading is widespread, thanks to its real-time communications capabilities in a time-sensitive industry. When theres news that can move markets, traders often zap instant messages to their clients rather than trying to track them down on the phone or send e-mails. A trader also can push an IM out to a group simultaneously rather than trying to juggle multiple phone calls.
With IM adoption expected to grow within hedge fund and other financial services firms, compliance officers and IT managers in these organizations will need to manage IM within a comprehensive compliance and archiving framework. Instant messaging communications are specifically included in SEC regulations as a form of electronic communication, and as such must be managed in a way that is consistent with existing e-mail policies.
Having been relatively free from regulatory oversight until now, many hedge fund firms may find themselves unprepared to meet the new SEC regulations pertaining to IM. The rules require registered financial advisers to archive their IM communications.
Some companies have barred the use of public IM services such as AOL Instant Messenger or Yahoo Instant Messenger, mainly for security purposes and also so their traders appear more professional. Would you take a trading tip seriously from someone who shows up on your screen as TheBigDog, or would you prefer to chat with Geoffrey Jones?
Solutions available today, such as the Bloomberg messaging system, can be used to convey market information and to trade ideas back and forth. Bloomberg requires proprietary hardware, though, and is more suitable for an in-house system.
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Starter Package
Reuters Messaging, based on Microsoft Office Live Communications Server technologies, can be used even by those who dont yet subscribe to Reuters services–and has the added benefit of being free. And Reuters Messaging logs you in using your full, real name, rather than a screen name. Due to compliance concerns, many financial institutions have their own enterprise systems that function as gated communities.
In the wake of the SEC regulations, IMlogic has announced a new quick-start package, available now, designed to help hedge fund advisers comply with the mandates to secure and save IM communications. The company says the package will help companies put IM usage in compliance quickly and without a high price tag.
The IMlogic Quickstart Pack for Hedge Funds includes IM Manager, an enterprise-class IM management solution. IM Manager allows hedge fund firms to meet SEC archiving and policy requirements for IM by providing all of the necessary tools to capture and review all IM traffic.
These include reliable logging of IM conversations across all major public networks, the ability to create communication boundaries to enforce authorized-only communications, a message archive with employee data for enhanced search capability and reporting, a search and retrieval interface, and the ability to print e-mail compliance reports. The package includes additional security, compliance and policy enforcement features required to support the SEC ruling.
IMlogic also announced Thursday that it has signed up a number of partners with financial services expertise to help hedge fund firms with limited IT resources implement the Quickstart Pack, including 17a-4 LLC and Integration Consulting Group (ICG).
Customers also can outsource their IM compliance requirements to IMlogic hosting provider partners, including Richard Fleischman & Associates Inc., RFA, Safecore and FivePoints Compliance Inc., eliminating the need for new software, hardware and support staff investments.
