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Compliance E-Mail Products Flooding Market
By Alison Sahoo, Ignites.com
May 13, 2005
Despite ongoing warnings from the SEC to be more vigilant with internal e-mail recordkeeping, many firms have had trouble complying
due to technology limitations. But now, new products hitting the market offer firms more tools to help them comprehensively sort e-mails.
The products can identify messages that should be kept, those that might be problematic and those subject to attorney-client privilege.
These developments are important because regulators are becoming more and more aggressive in their review of electronic messages, says Ann Davis, director of business development for LiveOffice. This week the firm launched an upgraded version of its AdvisorMail product.
AdvisorMail enables companies to electronically monitor, retain and archive thousands of e-mails, attachments and instant messages in a secure location.
DolphinSearch also launched its ComplianSeek program this week. The program goes beyond just individual word searches when scanning e-mails. “Other storage systems search by keyword,” says Raleigh Hoban, marketing manager for DolphinSearch. “But ComplianSeek uses a patented technology that recognizes different phrases and can identify meanings from their context. It understands the language and knows the meaning of words.”
ComplianSeek can identify circumstances of potential fraud without having to pinpoint the word “fraud” in the text, for example. That improves both accuracy and cost compared with other systems, she says.
“In the past, our clients had received regulatory requests for back e-mails, and it was very expensive for them to reactively go through their archives and pull them up,” says Victor Siclari, a partner at law firm Reed Smith, which partnered with DolphinSearch to develop the product. Reed Smith provided the intellectual capital while DolphinSearch handled technical development.
Siclari says ComplianSeek indexes and stores e-mails for future retrieval. It also has an audit function that allows compliance officers to quickly identify messages that indicate problematic behavior. That ability allows them to easily audit e-mails and manage storage, he says.
Further, this feature allows firms to erase e-mails they don’t have to keep without worrying about being viewed by regulators as destroying records. E-mails, like paper documents, are subject to SEC books and records rules. Depending upon the subject, the files must be organized and retained for several years after they were created.
Increasingly, firms are choosing to keep just what is required, T. Rowe Price vice president and associate legal counsel Sarah McCafferty said at the Investment Company Institute General Membership Meeting this week. That's not only out of regulatory concerns but also to avoid unnecessary disclosure in case of civil litigation.
“As a mutual fund or an advisor, you are not required to keep all e-mails," John Walsh, associate director and chief counsel of the SEC's Office of Compliance, Inspections and Examinations said yesterday during the meeting.
Firms are only required to keep e-mails that would also have had to have been retained if they were paper documents, Walsh explained. However, if firms choose to keep more e-mail than is required, they must produce it upon the SEC's request.
ComplianSeek’s advanced recognition technology will also help chief compliance officers, or CCOs, proactively check for wrongdoing. And they can use the product to identify e-mails subject to attorney-client privilege.
Attorney-client privilege protects communications between lawyers and their clients by keeping them confidential. It encourages openness and honesty between attorneys and their clients because attorneys can’t divulge, and also can’t be forced to reveal, those communications.
The SEC said it expects e-mail subject to privilege to be properly identified. But not all firms have been able to ensure that all privileged e-mails are tagged. And a growing number may be claiming privilege too often.
AdvisorMail’s new version 4.0 also addresses that problem, although it operates in a different way than ComplianSeek.
Its new Attorney-Client Privilege controls allow users to assign e-mails and instant messages to a secure folder that protects the communications from standard review procedures. Once a message is placed in the folder, AdvisorMail lets the system administrator grant privilege rights only to certain auditors. Only those auditors can view the full text of confidential communications.
“We understand that the last thing our clients want is to have regulators standing in their offices while they are trying to rapidly sort out privileged attorney-client communications,” says LiveOffice’s Davis.
Others in the industry, however, caution that while new technologies may represent an improvement over older systems, the issue of privilege is complicated and some human review of documents will still be necessary.
"It is hard to imagine a technology-based method that could capture everything," says Dechert partner Catherine Botticelli. "My concern would be that you would still have to undertake other efforts to make sure you've identified all potentially privileged e-mails and instant messages. These systems may be able to cut that time in half, but it is unlikely that they can be a magic bullet because privilege issues are complicated."
She notes a number of factors that would influence privilege, such as who wrote the e-mail, in what capacity they were acting and whether they were dispensing legal advice.
For example, Botticelli says that an attorney sending an e-mail to a colleague to schedule a lunch appointment wouldn't be considered privileged. But some systems might flag that message based simply upon the attorney's position in the organization.
ComplianSeek is priced at about $750 per user per year. AdvisorMail costs $10 per month per e-mail address plus a one-time set-up fee that is based on each organization’s existing e-mail infrastructure.
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The products can identify messages that should be kept, those that might be problematic and those subject to attorney-client privilege.
These developments are important because regulators are becoming more and more aggressive in their review of electronic messages, says Ann Davis, director of business development for LiveOffice. This week the firm launched an upgraded version of its AdvisorMail product.
AdvisorMail enables companies to electronically monitor, retain and archive thousands of e-mails, attachments and instant messages in a secure location.
DolphinSearch also launched its ComplianSeek program this week. The program goes beyond just individual word searches when scanning e-mails. “Other storage systems search by keyword,” says Raleigh Hoban, marketing manager for DolphinSearch. “But ComplianSeek uses a patented technology that recognizes different phrases and can identify meanings from their context. It understands the language and knows the meaning of words.”
ComplianSeek can identify circumstances of potential fraud without having to pinpoint the word “fraud” in the text, for example. That improves both accuracy and cost compared with other systems, she says.
“In the past, our clients had received regulatory requests for back e-mails, and it was very expensive for them to reactively go through their archives and pull them up,” says Victor Siclari, a partner at law firm Reed Smith, which partnered with DolphinSearch to develop the product. Reed Smith provided the intellectual capital while DolphinSearch handled technical development.
Siclari says ComplianSeek indexes and stores e-mails for future retrieval. It also has an audit function that allows compliance officers to quickly identify messages that indicate problematic behavior. That ability allows them to easily audit e-mails and manage storage, he says.
Further, this feature allows firms to erase e-mails they don’t have to keep without worrying about being viewed by regulators as destroying records. E-mails, like paper documents, are subject to SEC books and records rules. Depending upon the subject, the files must be organized and retained for several years after they were created.
Increasingly, firms are choosing to keep just what is required, T. Rowe Price vice president and associate legal counsel Sarah McCafferty said at the Investment Company Institute General Membership Meeting this week. That's not only out of regulatory concerns but also to avoid unnecessary disclosure in case of civil litigation.
“As a mutual fund or an advisor, you are not required to keep all e-mails," John Walsh, associate director and chief counsel of the SEC's Office of Compliance, Inspections and Examinations said yesterday during the meeting.
Firms are only required to keep e-mails that would also have had to have been retained if they were paper documents, Walsh explained. However, if firms choose to keep more e-mail than is required, they must produce it upon the SEC's request.
ComplianSeek’s advanced recognition technology will also help chief compliance officers, or CCOs, proactively check for wrongdoing. And they can use the product to identify e-mails subject to attorney-client privilege.
Attorney-client privilege protects communications between lawyers and their clients by keeping them confidential. It encourages openness and honesty between attorneys and their clients because attorneys can’t divulge, and also can’t be forced to reveal, those communications.
The SEC said it expects e-mail subject to privilege to be properly identified. But not all firms have been able to ensure that all privileged e-mails are tagged. And a growing number may be claiming privilege too often.
AdvisorMail’s new version 4.0 also addresses that problem, although it operates in a different way than ComplianSeek.
Its new Attorney-Client Privilege controls allow users to assign e-mails and instant messages to a secure folder that protects the communications from standard review procedures. Once a message is placed in the folder, AdvisorMail lets the system administrator grant privilege rights only to certain auditors. Only those auditors can view the full text of confidential communications.
“We understand that the last thing our clients want is to have regulators standing in their offices while they are trying to rapidly sort out privileged attorney-client communications,” says LiveOffice’s Davis.
Others in the industry, however, caution that while new technologies may represent an improvement over older systems, the issue of privilege is complicated and some human review of documents will still be necessary.
"It is hard to imagine a technology-based method that could capture everything," says Dechert partner Catherine Botticelli. "My concern would be that you would still have to undertake other efforts to make sure you've identified all potentially privileged e-mails and instant messages. These systems may be able to cut that time in half, but it is unlikely that they can be a magic bullet because privilege issues are complicated."
She notes a number of factors that would influence privilege, such as who wrote the e-mail, in what capacity they were acting and whether they were dispensing legal advice.
For example, Botticelli says that an attorney sending an e-mail to a colleague to schedule a lunch appointment wouldn't be considered privileged. But some systems might flag that message based simply upon the attorney's position in the organization.
ComplianSeek is priced at about $750 per user per year. AdvisorMail costs $10 per month per e-mail address plus a one-time set-up fee that is based on each organization’s existing e-mail infrastructure.
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