Electronic Communications in the Financial Services Industry

New York, NY, USA November 17, 2003

: Supervisory Obligations and Recordkeeping Requirements

Recent regulatory guidelines and increased user adoption are forcing financial institutions to develop a comprehensive communications management program.

Regulators continue to levy multi-million dollar fines against financial institutions for inadequate systems or procedures for the retention of electronic mail while prosecutors use e-mail records against these firms as evidence in legal battles. Despite these trends, e-mail and, more recently, instant messaging (IM) continue to increase in popularity and are set to become preferred platforms for application development.

The number of e-mail users in the financial services industry in the United States has the potential to approach five million by 2006

, according to the new report. The instant messaging community is gaining new users at a much more rapid rate as corporations learn to leverage and control this newer technology.

Despite the risks presented by the numerous forms of electronic communication, many firms still have not established the policies and systems required by regulators. "There are significant gaps in the e-mail and instant messaging control and archival framework at most US financial institutions," says Michael Haney, a senior analyst at Celent and author of the report.

Firms need to combine their business and compliance requirements, and to document the corresponding management processes and procedures in an enterprise-wide policy manual. "Fewer than 15% of firms have a comprehensive system in place which meets both compliance and business needs," continues Haney.

This paper will help financial institutions and the technology providers with whom they partner to understand the legislative and regulatory trends affecting the industry today as they relate to electronic communications. In addition, the report identifies the supervisory agencies responsible for interpreting and enforcing legislative policies, and highlights some recent disciplinary actions that directly resulted from a firm's failure to maintain proper controls around their electronic communication systems. The report also examines how the technology itself is evolving to ease the burden of complying with regulatory policies while also creating new challenges as it makes electronic communications more numerous and complex.

The report includes 10 tables and 7 figures.

A is available online.

of Celent Communications' Retail Banking, Retail Securities & Investments, and Institutional Securities & Investments research services can download the report electronically by clicking on the icon to the left. Non-members should contact info@celent.com for more information.