Are you listening out for audio communications?
A recent Commodity Futures Trading Commission (CFTC) fine issued against a future commissions merchant verifies that regulators are – and are expecting that firms have their record retention policies in order for electronic messaging and audio communications alike.
A case of absent audio
In September 2024, the CFTC fined a firm $650,000 for “recordkeeping deficiencies and failure to obtain customer authorizations before entering trades for customers.”
The CFTC found that from June 2019 to September 2023, the firm used three platforms to make or keep audio recordings of personnel’s conversations with clients, including RingCentral, Skype SmartTap, and Microsoft Teams. On several occasions, the platforms underwent issues that led to the inability to make or retain approximately 3,000 recordings of calls with customers. Included in these communications was information about quotes, solicitations, bids, offers, trading, and prices leading to transactions.
The failure to record these communications violated CFTC Regulation 1.31 and 1.35 related to recordkeeping obligations to capture oral communications. However, the CFTC highlighted that the firm self-reported and cooperated, which is an important detail to note considering regulators’ recent emphasis on the benefits of collaboration during investigations.
This calls to mind separate cases that arose over the past months, such as a $5 million CFTC fine at the tail-end of August. In this instance, the regulator found that the firm in question failed to report millions of swap transactions required by CFTC regulations and had no written policies to monitor voice communications.
Within the recent audio retention fine order, the CFTC also referenced a September 2022 enforcement involving voice communications failures. In the enforcement, a corporation was charged $500,000 for failure to retain audio recordings. This lapse in retention occurred because the firm’s audio recording system was improperly installed by an external vendor, and as with other fines concerning record retention, the CFTC reaffirmed that “proper recordkeeping is vital to protecting…markets…from fraud and manipulation.”
Financial industry players will have seen a barrage of recordkeeping fines over the last month alone, which follows an overall concentration on communications capture spanning the last several years. Like previous cases, all of the latest enforcements found that a collection of firms had insufficient measures in place to “maintain and preserve electronic communications” – an increasingly familiar tale.
Regulatory scope and succession considered, the inclusion of voice capture seems recurring within enforcements, demonstrating that in addition to the scrutiny of communications compliance overall, voice retention’s position on the regulatory watchlist is rising.
Capture the complete picture
Of particular interest in this recent case is the fact that the fined firm utilized three different platforms to record and retain conversations per CFTC regulations. One of the platforms cited in the case – Skype SmartTap – failed to record 2,115 customer calls due to platform deficiencies caused by software patching issues and software updates.
Third-party reliance has been a topic tied into several industry conversations, such as with operational resilience and data governance. As displayed by both this case and other, more universally afflicting ones like the Crowdstrike outage, knowing that a third-party solution can prove its security and reliability is fundamental.
Furthermore, the involvement of multiple platforms presents the added risk of an increasingly complex web of providers to monitor. Should a data breach or technology disruption occur, there is a higher chance of a firm’s information being affected. In the sense that information is required for an investigation, reliance on multiple vendors could also make it more difficult to procure and produce data at a moment’s notice.
Another point to consider is the involvement of Microsoft Teams, which brings into question the capabilities that a multi-faceted platform presents. Microsoft Teams has become widely used across the financial industry. As found in Global Relay’s 2023 Data Insights: Compliant Communications report, purchasing decisions for the Microsoft Teams Connector – a conduit that allows firms to link and consolidate any platform’s data into their archive – increased by 229% during the COVID-19 pandemic.
Like other advancing channels, Teams offers audio capabilities in addition to just messaging capabilities. If a firm’s personnel are utilizing these features to communicate internally or externally, firms need to adjust retention policies accordingly.
Platforms like Teams even offer the ability to retain communications within their own systems for compliance purposes. Yet, it is important to bear in mind that these offerings often don’t meet every regulatory compliance need, meaning that firms will need to employ further securities.
Tape the record to break the record
Regulators have made it evident that voice capture is an indisputable element of communications compliance. Consequently, voice recordkeeping requirements needs to be measured accordingly as firms bolster their retention policies for electronic messaging communications.
As well, evolving platforms have become an indispensable aspect of present-day business operations. Burgeoning platform capabilities mean there is more information to capture than ever before. This being so, firms must modernize their policies to reflect new channels and enlist the support of third-party solutions to document all details of communications data.
Reliance on third-party platforms and systems is inevitable, therefore, firms must weigh their choices carefully when electing assistance. Employing a single solution significantly decreases the likelihood of data lapses or insufficiencies, and end-to-end solutions offers the added advantage of easily-accessible and uniformly stored data.
With each new recordkeeping case adding to the now billions of dollars charged against firms for off channel-communications, regulators have made abundantly clear that firms should set in place rigorous procedures to ensure complete retention if they have not already. The communications compliance bell is ringing louder than ever before – are you listening (and recording)?
