The financial industry has some of the most complex operational regulations in the entire business world.
Success in trading, financial management and other endeavors doesn’t just rely on business expertise and market analysis, but on a strong working knowledge of relevant laws and regulations as well.
A company that doesn’t place a high level of emphasis on compliance will see many of its gains washed away by regulatory fines and other penalties that hamstring specific operations and generally make operations more difficult.
Because compliance is so important – and because it involves so many different aspects of a business – it’s crucial to address every aspect.
One area that can cause both frustration and negative outcomes is the secure storage of unstructured communication data.
Here’s a look at why archiving unstructured communication data matters so much for financial services and how financial firms can develop effective data archiving solutions.
Email Archiving in the Financial Industry: Managing Information in a State of Flux
Just 20 years ago, the internet was in its infancy and the business applications of the major person-to-person communication tool it enabled – email – were still in the development stage.
While some forward-thinking businesses were early adopters, it still took years for email to reach its status as a ubiquitous, universal tool for professional communication.
This major shift was eventually met by financial industry regulations that placed clear responsibilities on those in the financial industry.
Today, years after the initial explosion of digital communication as a powerful business tool, financial firms have to also contend with other forms of communication and information sharing.
Both social media and instant messaging were eventually welcomed by businesses, and on a somewhat shorter timetable than email. What all three of these forms of digital communication have in common is their ephemeral or disposable nature.
Chats disappear once the window and program are closed. Social media posts and conversations often remain in existence on the web, but retrieving them in their original format is an impractical exercise. Emails, while stored, are eventually deleted and hard, if not impossible, to sort through.
The transient existence of digital communication means both strong retention rules on the part of regulators and the need for the financial services sector to implement effective, comprehensive and responsive information archiving solutions.
The Features Financial Services Need for Compliance
Complying with a variety of financial and informational regulations can be extremely difficult unless the right approaches and systems are used.
So here’s a rundown of essential features your archiving solution should have to help you stay in line with financial sector regulations:
- Comprehensive indexing. It’s not enough to simply store communications in a bulk format, they must also be indexed to make future retrieval successful and stored in formats compliant with relevant rules.
- Capture a variety of formats. The number of communication channels and formats in which information is stored is increasing rapidly. At the same time, all this information is considered official business records, and thus needs to be preserved. So, it’s important that you can capture not just email, but also instant messaging, texts, voice calls, videos, gifs, etc.
- 24/7 monitoring of storage drives. Security of the information stored is also critical – an archiving solution that doesn’t offer monitoring of storage drives and support should an incident occur provides little in the way of continuous security.
- Custom retention policies. There are numerous regulations stipulating for how long records need to be preserved. To stay aligned with these laws, your archiver should allow you to specify custom retention policies and rules, so that you preserve information for as long as necessary, but not longer than that. For more information on setting email retention policies, here’s a list of best practices on setting retention policies.
- Customizable roles and permissions. To ensure all your employees and compliance officers have access to the right information, it’s important that you can customize roles according to everyone’s job responsibilities. This allows you to ensure efficiency and preserve the security of your records.
- Legal hold. In case when you expect potential audits, investigations, or litigation cases, you may need to preserve some records even after their retention period expires. This is where the legal hold feature comes in handy. With it, you can preserve electronically stored information indefinitely.
- Configurable expunge periods. Being able to set custom expunge periods allows you to set an automated removal of all messages that you are no longer required to keep. This enables you to have fresh storage space as data will be deleted once their life span expires.
- Advanced searches. Financial firms work with enormous data sets that are exchanged via email. With advanced search capabilities, you can narrow down your search with a lot of precision and retrieve all the information in just seconds.
These are just some of the features that a modern archiving system for financial services needs to have. For an exhaustive list of features (including both hardware and software), check out this guide on which features to consider when buying your archiving solution.
Archiving solutions that can provide this level of accessibility, security and compliance are simply necessary in the highly-regulated financial world.
Email communication is now the mainstay in every office, and compliance has grown in importance along with it. Banks and other financial institutions are taking record-keeping and email archiving more and more seriously due to shake-ups in the industry.
Financial Firms: Archiving for Modern Compliance
Before the Dodd-Frank Act, regulations already required financial services firms to archive all data relating to specific business transactions and financial activities.
By examining these records, the financial regulators were able to carry out their work – determining if a specific firm or employee had violated any laws or regulations.
Other regulations and regulatory bodies like FINRA, SEC 17a-4 and others have always required financial services firms to prove their business is being conducted in the appropriate manner. These would have included requests similar to eDiscovery, with terabytes of data involved and a certain time frame set out for results to be provided.
The difference between these compliance requests and modern compliance is that the search only focused on a specific department.
The Dodd-Frank Act has a much broader scope, and regulators are no longer focused on specific issues or misdemeanors.
The financial regulators are now ever vigilant in all aspects of a firm’s operations in order to determine if they are a threat to the finance industry or even the economy.
The Dodd-Frank Act of 2010 gave financial regulators much broader authority to look at a firm’s operations. As part of the process of monitoring operations within the financial industry, regulators need access to the internal email communications of any firm they investigate.
The best way to comply with this request is to have a complete and accessible email archive.
Other acts like Sarbanes-Oxley, Gramm-Leach-Bliley, SEC 17a (3, 4), NASD Rule 3110, NYSE Rule 440 and the Investment Advisers Act cover the regulatory compliance requirements of electronic data storage in the financial industry. Each outlines the need for appropriate, secure archiving of email communication.
There is only one way for regulators to achieve the required level of vigilance.
They must continuously monitor the internal operations of all firms.
To have full vigilance, regulators need access to internal email communications throughout the company. By ignoring the email archiving and compliance issue, small financial firms are essentially asking for trouble.
Why Email Matters to Financial Services
Although email is the most common communication tool in all industries, it is vitally important in the financial sector, where emails contain sensitive financial information. It’s no surprise then that email is a major target during compliance audits.
Regulatory compliance requirements for the financial industry are spread across a number of acts, some of which are more well-known than others.
These acts all demand that companies in the financial industry maintain good email archives, which is why a solid archiving solution is essential in achieving regulatory compliance.
Failing to meet these regulatory compliance requirements will, in most cases, result in heavy fines. On the other hand, an email archive that meets the requirements outlined in these acts could provide huge savings for companies in the financial industry. And looking ahead, archiving will be even more important:
Email archiving is a valuable solution for any company. It is, however, enormously important in the financial industry, given the level of regulatory compliance required in this particular sector.
In case you want to learn more about how information archiving can help you stay compliant with financial regulations, here are some more resources to help you create a sound action plan: