Chapter 17: Instant Messaging Is Big on Wall Street

Overview

Wall Street was an early adopter of instant messaging, and its popularity continues to soar. Among broker-dealers and investment bankers, IM is widely used to distribute research, negotiate prices, execute orders, and stay in touch with clients and colleagues.

IM Rule # 30: As Wall Street’s use of instant messaging grows, regulatory oversight grows right along with it.

In response to the early and widespread adoption of IM in the financial services industry, the NASD joined the SEC and NYSE in 2003 to announce new IM retention regulations for the securities industry.

In June 2003, NASD issued a ‘‘Notice to Members,’’ requiring brokers and traders to retain and archive all IM communications between brokers and clients for a period of three years, just like e-mail and written correspondence. ^[1] Under NASD guidelines, all instant messages must be retained—even that which is sent through personal IM accounts and transmitted via public networks. ^[2]

In addition, NASD announced that IM content older than three years can be purged. ^[3] Organizations that want to limit the time and money spent responding to discovery requests should take advantage of the opportunity to delete instant messages that exceed the three-year limit. Remember, if IM is subpoenaed, you must produce every message requested on relatively short notice. You cannot be expected to produce instant messages that have been purged in accordance with industry regulations and your own consistently enforced written policy.

For organizations that cannot adequately supervise IM exchanges, NASD suggests employees be prohibited from using IM to communicate with customers. ^[4]

^[1]Elliot Blair Smith, ‘‘Wall St. Bloodhounds Track Instant Messages for Clues,’’ USA Today (September 18, 2003), B1.

^[2]Jenny Anderson, ‘‘Regulators to Banks: We Get IMs,’’ New York Post (June 2003).

^[3]Ron Anderson, ‘‘There’s More to IM Logging Than You Think,’’ Network Computing (July 10, 2003), 23.

^[4]Laura MacInnis, ‘‘NASD Advises Brokers to Monitor Instant Messages,’’ Forbes.com (June 18, 2003), www.forbes.com/markets/newswire/2003/06/18/rtr1004451.html.