Regulating mobility: Mobile trading and compliance in the financial sector
 

Regulating mobility: Mobile trading and compliance in the financial sector

on

  • 1,688 views

In the financial sector, managing compliance with regulatory requirements is an enormously complex challenge. Rapid technology advances in areas such as automated trading, while revolutionising ...

In the financial sector, managing compliance with regulatory requirements is an enormously complex challenge. Rapid technology advances in areas such as automated trading, while revolutionising everyday operations, are making the job of compliance tougher. Until relatively recently the use of mobile technologies in financial institutions—unarguably a boon to trader productivity and a rich source of new products and services—has escaped regulatory scrutiny in most developed countries.

In the United Kingdom that changed in 2011 when the Financial Services Authority—since reconstituted as the Financial Conduct Authority (FCA)—announced that it was time for investment firms to start recording “relevant communications” on mobile devices. As this article will show, the requirement poses numerous challenges to compliance officers, chief information officers and IT directors of financial institutions, and not just in relation to technology. There may, however, also be opportunities for firms which move faster to address the recording requirements.

Statistics

Views

Total Views
1,688
Views on SlideShare
1,688
Embed Views
0

Actions

Likes
0
Downloads
3
Comments
0

0 Embeds 0

No embeds

Accessibility

Categories

Upload Details

Uploaded via as Adobe PDF

Usage Rights

© All Rights Reserved

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Processing…
Post Comment
Edit your comment

    Regulating mobility: Mobile trading and compliance in the financial sector  Regulating mobility: Mobile trading and compliance in the financial sector Document Transcript

    • Regulating mobility Mobile trading and compliance in the financial sector* Written by the Economist Intelligence Unit Recording the facts I n the financial sector, managing compliance with regulatory requirements is an enormously complex challenge. Rapid technology advances in areas such as automated trading, while revolutionising everyday operations, are making the job of compliance tougher. Until relatively recently the use of mobile technologies in financial institutions—unarguably a boon to trader productivity and a rich source of new products and services—has escaped regulatory scrutiny in most developed countries. In the United Kingdom that changed in 2011 when the Financial Services Authority—since reconstituted as the Financial Conduct Authority (FCA)—announced that it was time for investment firms to start recording “relevant communications” on mobile devices. As this article will show, the requirement poses numerous challenges to compliance officers, chief information officers and IT directors of financial institutions, and not just in relation to technology. There may, however, also be opportunities for firms which move faster to address the recording requirements. Mobile communications were initially exempted from the legal requirement to record and store voice communications, which came into force in March 2009, because it was generally agreed that the technology to do so was not mature enough. That exemption came to an end two years later, with firms being required to capture mobile communications from November 2011. More than two years on, it is unclear how many financial institutions are actually complying with it. Research published in late 2012 by Ovum, a technology analysis firm, suggested that up to two-thirds of the companies required to record mobile communications had not complied. Rik Turner, an Ovum senior analyst, reckons not much has changed since then: “I would bet money that there is still a significant minority of institutions not fully compliant.” The FCA says it has not taken action against any firms for non-compliance, but is unable to say what the level of compliance is. Joram Borenstein, vice-president of NICE Actimize, which provides compliance and risk management solutions to the financial industry, succinctly sets out the challenges: “First, firms need to ensure that secure connectivity is ensured so that proprietary information, processes and plans are not divulged. Second, the connectivity must be reliable across offices, devices and countries.” Mr Turner adds that capturing mobile data—including calls and SMS messages—is a whole new headache for the industry. He believes that any non-compliance thus far is due to the complexity the above issues represent for firms. Technology, security and provider choices There are a number of choices a firm has to make when implementing mobile recording, not least of which is choosing which technology to deploy. The choices are between a Sim-based solution or an app on the device, and both have their perceived advantages and disadvantages. Sim-based solutions mean that at least in the first instance, calls are recorded by the mobile provider and stored in the cloud. This offers IT departments convenience in terms of storage and support but can also pose security and compliance concerns, particularly in regard to where the provider stores the data. s p onsore d b y : *This and other articles about the challenges and opportunities of mobility, sponsored by EE, can be found at http://eefutureconnections.economist.com/. Rik Turner, “Mobile Recording in the Financial Sector: an Update”, Ovum, February 19, 2013. 1
    • Capturing the data via an app on the device presents other concerns, particularly in a BYOD (bring your own device) environment, where employees use their own devices for work. Any app therefore has to work across all the mobile platforms as well as provide levels of security that will keep the IT department happy. Security is a big issue, says Seth Berman, executive managing director of Stroz Friedberg, a consultancy. “Mobiles are computers and can be hacked,” he says. He also points out that people view their phones as personal devices and often “ignore the rules” set by their IT and compliance departments. For example, he says, it is difficult to get users complying with the need to record SMS messages. Another factor thought to be holding back compliance, according to Mr Turner, is that the providers of recording services tend to be smaller, newer businesses. Many financial services institutions are reluctant to entrust something as vital as compliance to a small start-up. The challenges of ensuring recording of mobile communications are not limited to the IT department. According to Olivier Ruch-Rosanoff, who specialises in IT risk and information management at a global bank: “Measures have to be in place to involve all the main stakeholders: HR, IT, internal control.… You need to identify which business functions need to be recorded.” The biggest challenge, he adds, is “how to ensure that the right people are recorded at the right times.” Working internationally can also present difficulties. Some jurisdictions require firms to keep data for longer than others, says Mr Ruch-Rosanoff: “Countries have started to define maximum times as well as minimum times [for storing data]. Dealing with those requirements across multiple regions is challenging.” Opportunity beckons There is a silver lining for institutions who master the mobile recording challenges, in that the data that is captured can be put to good use by analysing it. Nick Patience, director of market development at Recommind, a California-based company that provides software for electronic discovery, says that firms can mine that data to “attain a broad overview of non-compliance risks”. Ovum’s Mr Turner, however, points to a much richer possibility: “Having spent considerable time and money to meet regulatory recording requirements, it is only natural that the … institutions should look for a return on investment beyond compliance. If a firm can see how many calls are made by traders to achieve a certain level of investment, perhaps it can enhance the performance of their slower employees to speed time to money,” he says. “If voice analytics,” he adds, “can detect certain words such as ‘oil’ or ‘carbon emissions’ cropping up with increased regularity in traders’ conversations during a given week, perhaps they can proactively alter their trading strategies—provided such action is legal.” Financial firms can be sure of one thing: the technology landscape will change, and quickly. Says Mr Borenstein: “Financial services firms should assume that mobile devices and connectivity will continue to morph: new ways of connecting, transacting and communicating are bound to be upon us before we know it. Being aware of new developments is critical to ensure that existing plans and protocols do not become outdated.”