FCA cautions against providing trading signals via apps such as WhatsApp
The UK Financial Conduct Authority (FCA) today warned of risks stemming from reduced monitoring of electronic communications.
The pandemic has had a significant effect on how businesses are run, with changes to technology and increased homeworking. Nevertheless, the FCA expects firms to continue to comply with the recording obligations in our Senior Management Arrangements, Systems and Controls sourcebook (SYSC 10A), which remain the same.
Risks from misconduct may be heightened or increased by homeworking, the regulator said. This includes increased use of unmonitored and/or encrypted communication applications (apps) such as WhatsApp for sharing potentially sensitive information connected with work.
Firms will need to ensure that, if such apps are used for in-scope activities on business devices, they are recorded and auditable. A broad range of activities are included, such as arranging of deals and dealing (as principal or agent) in investments, managing investments, as well as managing a UCITS, an AIF and/or establishing, operating or winding up a collective investment scheme.
The FCA notes that it has acted against individuals and firms for misconduct which involved the use of WhatsApp and other social media platforms to arrange deals and provide investment advice. This included transmitting lists of trades to copy (‘trading signals’) and making other investment recommendations to clients.
The regulator says that it views these actions as serious and has sought orders preventing such individuals from carrying out these activities in the future.
The FCA explains that recording obligations apply to conversations and communications made with, sent from, or received on, equipment provided or permitted to be used for business purposes.
A firm to which the recording regime in SYSC 10A applies, must take reasonable steps to record telephone conversations and keep a copy of electronic communications of activities falling within scope of the recording rules. Firms must ensure that their recording policies can identify calls and communications that directly relate to the performance of in-scope activities.
They should also identify communications intended to lead up to these activities being performed or where there is a reasonable prospect of such activities being performed. Depending on the circumstances, this may also include internal conversations concerning in-scope activities.