Financial institutions must now monitor and archive text and instant messages sent by employees through company-issued handsets much like they do with corporate e-mail. However, only a handful of companies offer compliance software.
A recent requirement by the Financial Industry Regulation Authority has created a new market for software companies to create technology that meets the guidelines set for electronic communications. LiveOffice AdvisorMail and Akonix Systems Inc. were the first to offer software that can document and archive wireless correspondence.
Onset Technology Inc. recently entered the market with its Advanced Compliance Tool, which is integrated in its METAmessage enterprise wireless solution. The solution archives text and instant messages and provides financial firms the ability to scan and block messages before they are sent. Onset officials say the break-through technology can also be used by publicly traded companies and the health field to meet requirements set by the federal government.
“Companies were asking for this in the marketplace,” said Zack Silbinger, Onset VP of marketing and business development. “From a legal aspect, companies know they need to cover their bases.”
Companies that choose to ignore the regulations set by FINRA are subject to penalties, said Nancy Condon, a spokeswoman for FINRA, the largest non-governmental regulator for all securities firms doing business in the U.S. Condon said penalties depend on the severity of the violation.
A ticking time bomb
Patrick Corr, Onset VP of sales, said there are many financial firms that have not been able to get a handle on archiving messages sent through employees’ wireless devices.
“All financial institutions are sitting on a ticking time bomb,” Corr said.
Vivian Tero, IDC compliance infrastructure program manager, agrees that businesses have struggled with meeting the requirements. She said rules governing ethical walls, message retention and information sent out by wireless devices have been difficult to enforce since messages aren’t always sent through a corporation’s messaging server or network. Tero said Onset’s software is a viable option to comply with the regulations.
“Until now, wireless messaging has been the Wild West of compliance,” Tero said.
Last December, FINRA issued guidelines regarding corporate wireless communication for its 5,000 members. The regulatory authority said the requirements were needed because technological innovations have “altered how people deliver, receive and store communications.”
Shortly after FINRA’s announcement, LiveOffice said its e-mail archiving solution could capture and store wireless messages sent on Research in Motion Ltd.’s BlackBerry devices, and smartphones made by Palm. Matt Smith, Live Office CEO, said the software can also be used on Apple Inc.’s iPhones.
Black-listing, white-listing
Along with archiving messages, the software can scan messages prior to delivery for certain words or phrases outlawed in financial communications. Smith said many firms adopt policies that disallow employees from doing business with text or instant messages because many can’t afford to financially.
“The large companies can invest in it, but as you start moving down, smaller firms struggle to keep up with technology and it’s expensive,” he said.
In the future, Smith said he expects firms to loosen restrictions on text messaging because it’s widely used. He also expects more companies to enter the market with compliance software.
“This is a big challenge for the financial industry, but also a huge opportunity for wireless,” he said.
In May, Akonix launched L7 Enterprise for BlackBerry smartphones. The software stores messages in archival platforms by name and other directory attributes, making text messages searchable, retrievable and auditable. At the time of the release, Akonix joined the BlackBerry Independent Software Vendor Alliance Program, forging a business and technology relationship with RIM. In August, Akonix was acquired by Quest Software and the company has integrated the company’s products with its own that support BlackBerry.
Beyond BlackBerries
Onset’s technology also is geared toward BlackBerry, but the company expects to serve Windows Mobile smartphones later this year and incorporate the iPhone and smartphones operating with Symbian software next year, Corr said.
The system can block inappropriate messages by using blacklists and whitelists to establish an ethical wall between specific users and groups. For example, the technology can block insider trading. A message sent by a broker to an analyst would be caught before the message is sent, Corr said.
The technology could also be beneficial for publicly owned companies to meet the requirements set by the Sarbanes-Oxley Act, which was enacted by Congress in 2002, following the corporate accounting scandals that engulfed Enron Corp., Tyco International and Adelphia Communications Corp. The software can also be used by the healthcare industry to protect patient confidentiality required by the Health Insurance Portability and Accountability Act.
The technology can block text messages that contain certain words or numbers. For example, names of patients or Social Security numbers would be off limits. The technology also allows companies to easily change and update contact rules for users and user groups.
In instances where inappropriate messages are caught by the technology, users are informed they attempted to break the rules, the company’s information technology department is notified and the message is automatically numbered and archived, Corr said.
David Ferris of Ferris Research said he expects more software companies to enter the market.
“Compliance on mobile devices is still relatively immature compared to PC- and server-based compliance,” he said.
Onset has clients that include large banks, government entities and law firms. So far, the company has done 1,400 installations of its METAmessage software. Reed Smith, L.L.P., a large law firm based in Pittsburgh, Pa., started using Onset’s software to track hours lawyers spent on cases for billing purposes. The company is now setting its sights on ACT, said Dennis Jacques, special projects manager for the law firm.
Jacques said the firm has 2,000 employees worldwide that use BlackBerry handsets.
“Our lawyers are on the go, constantly texting and chatting in regards to sensitive topics on their BlackBerry smartphones,” he said. “The ability to produce all electronic communications records for regulatory reviews or litigation support is a must.”
As for employees using their personal handset for business purposes, FINRA expects companies to prohibit employees from doing so unless the company is capable of supervising, receiving and retaining such messages.
