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Some companies find instant messaging risky
By Jaime Levy Pessin
July 28, 2006
NEW YORK (MarketWatch) -- Instant messaging may be old news in high school circles but in the world of financial advisors, firms are still
figuring out what to make of it.
Worried the informality of instant messaging could breed liability, many brokerage firms have banned their financial advisors from using the communication tool.
But some technology vendors say they've got the products that will allow firms to realize the value of instant messaging while mitigating their risk.
Regulators view instant messages as they do any electronic communications. They must be stored in a manner that allows for searches and screened for problematic content.
But firms say the nature of instant messaging makes it hard for them to incorporate the mode of communication into their compliance systems.
Firms including Citigroup Inc.'s (C) Smith Barney, Wachovia Corp.'s (WB) Wachovia Securities, Bank of America Corp.'s (BAC) Banc of America Investment Services, Raymond James Financial Inc. (RJF) and H&R Block Inc.'s (HRB) H&R Block Financial Advisors bar their financial advisors from using IM. Merrill Lynch & Co. (MER) allows internal instant messaging in some departments, but prohibits advisors from transacting business via IM.
Among the difficulties surrounding instant messaging: Some IM programs bypass companies' internal screening systems. Slang and abbreviations pervade many IM conversations, making it hard to monitor discussions based on key word searches. Plus, the best part of instant messaging - its speed - can be a pitfall.
"It's dangerous in that it is even more casual than email. Once you hit the send message, it's there," said Matt Bienfang, senior analyst with TowerGroup. "Once you start creating sentences of non-words or words that aren't in the library, it becomes more likely that you'll defeat the system, or you'll have so many flagged items it may defeat the usability of the system."
Although instant messaging isn't widespread in the financial advisory world, it's catching on in other industries. Earlier this month, the American Management Association and The ePolicy Institute released a survey of 416 companies that showed 35% of employees use instant messaging at work, even though only 31% of organizations had instant messaging policies. The survey also showed that half of employees using IM at work were downloading free IM programs from the internet; 26% of employers didn't know this was happening.
"If you ask people if IM is available, people say 'We don't allow it,'" said Bill Lyons, chief executive of AXS-One, which has created a compliance platform that archives instant messages along with emails and other electronic documents. "You may not allow it, but how many people are using it?"
Technology vendors are betting that firms will begin to allow instant messaging - and like AXS-One, they're offering products that will let firms capture, store and search IMs as they already do for emails.
"The fact of the matter is regulation is not going to stop people from using these technologies," said Steve Uhring, vice president of compliance technology vendor LiveOffice. He pointed to web conferencing as another technology that he expects will gain traction among financial advisors. If "somebody in the corporate office says, 'You guys can't use this,' that'll work until the demand from the people in the field is to the point where Corporate realizes" it'll be worthwhile.
But even if a firm archives its instant messages according to the rules, many expressed concern that the casual nature of IM communication could lead to considerable liability.
"The regulatory or judicial body inspecting the organization really wants corporate instant replay," Lyons said. "They focus on email and IMs because it's fertile ground."
The Securities and Exchange Commission agrees: "We found there could be very important communications through instant messages," said John Walsh, associate director and chief council for the SEC's Office of Compliance Inspections and Examinations.
Merrill Lynch sent out a memo in January reminding its employees that IMs are being kept according to the firm's general electronic communications guidelines; they are retained and may be reviewed by managers, compliance officers or legal staff, just as emails are.
"We are trying to make sure that our colleagues understand that instant messages are, in our eyes, and the eyes of the regulators, the same as an email," said Merrill spokesman Mark Herr. "They are to be used for business purposes and are not to be used to transmit information that is offensive, inappropriate or violates the standards we apply to all of our business communications."
Improved technology and the customer service benefits of IM could eventually make it mainstream in the brokerage world, said Ian Black, managing director of Aungate, whose technology intelligently monitors the content of electronic communications.
"It's a little bit of a sledgehammer response to simply ban it, because you'll find liability in other communication streams," he said. "Once you realize that shutting it down moves the liability elsewhere, and you still have a problem, I think it will force forward the realization that we work in a real-time world."
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Worried the informality of instant messaging could breed liability, many brokerage firms have banned their financial advisors from using the communication tool.
But some technology vendors say they've got the products that will allow firms to realize the value of instant messaging while mitigating their risk.
Regulators view instant messages as they do any electronic communications. They must be stored in a manner that allows for searches and screened for problematic content.
But firms say the nature of instant messaging makes it hard for them to incorporate the mode of communication into their compliance systems.
Firms including Citigroup Inc.'s (C) Smith Barney, Wachovia Corp.'s (WB) Wachovia Securities, Bank of America Corp.'s (BAC) Banc of America Investment Services, Raymond James Financial Inc. (RJF) and H&R Block Inc.'s (HRB) H&R Block Financial Advisors bar their financial advisors from using IM. Merrill Lynch & Co. (MER) allows internal instant messaging in some departments, but prohibits advisors from transacting business via IM.
Among the difficulties surrounding instant messaging: Some IM programs bypass companies' internal screening systems. Slang and abbreviations pervade many IM conversations, making it hard to monitor discussions based on key word searches. Plus, the best part of instant messaging - its speed - can be a pitfall.
"It's dangerous in that it is even more casual than email. Once you hit the send message, it's there," said Matt Bienfang, senior analyst with TowerGroup. "Once you start creating sentences of non-words or words that aren't in the library, it becomes more likely that you'll defeat the system, or you'll have so many flagged items it may defeat the usability of the system."
Although instant messaging isn't widespread in the financial advisory world, it's catching on in other industries. Earlier this month, the American Management Association and The ePolicy Institute released a survey of 416 companies that showed 35% of employees use instant messaging at work, even though only 31% of organizations had instant messaging policies. The survey also showed that half of employees using IM at work were downloading free IM programs from the internet; 26% of employers didn't know this was happening.
"If you ask people if IM is available, people say 'We don't allow it,'" said Bill Lyons, chief executive of AXS-One, which has created a compliance platform that archives instant messages along with emails and other electronic documents. "You may not allow it, but how many people are using it?"
Technology vendors are betting that firms will begin to allow instant messaging - and like AXS-One, they're offering products that will let firms capture, store and search IMs as they already do for emails.
"The fact of the matter is regulation is not going to stop people from using these technologies," said Steve Uhring, vice president of compliance technology vendor LiveOffice. He pointed to web conferencing as another technology that he expects will gain traction among financial advisors. If "somebody in the corporate office says, 'You guys can't use this,' that'll work until the demand from the people in the field is to the point where Corporate realizes" it'll be worthwhile.
But even if a firm archives its instant messages according to the rules, many expressed concern that the casual nature of IM communication could lead to considerable liability.
"The regulatory or judicial body inspecting the organization really wants corporate instant replay," Lyons said. "They focus on email and IMs because it's fertile ground."
The Securities and Exchange Commission agrees: "We found there could be very important communications through instant messages," said John Walsh, associate director and chief council for the SEC's Office of Compliance Inspections and Examinations.
Merrill Lynch sent out a memo in January reminding its employees that IMs are being kept according to the firm's general electronic communications guidelines; they are retained and may be reviewed by managers, compliance officers or legal staff, just as emails are.
"We are trying to make sure that our colleagues understand that instant messages are, in our eyes, and the eyes of the regulators, the same as an email," said Merrill spokesman Mark Herr. "They are to be used for business purposes and are not to be used to transmit information that is offensive, inappropriate or violates the standards we apply to all of our business communications."
Improved technology and the customer service benefits of IM could eventually make it mainstream in the brokerage world, said Ian Black, managing director of Aungate, whose technology intelligently monitors the content of electronic communications.
"It's a little bit of a sledgehammer response to simply ban it, because you'll find liability in other communication streams," he said. "Once you realize that shutting it down moves the liability elsewhere, and you still have a problem, I think it will force forward the realization that we work in a real-time world."
« BACK