Regulation

FCA warns advisers of misconduct risks during homeworking

Rozi Jones
|
12th January 2021
Social media phone tech
"We have 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."

The FCA has warned advisers that risks from misconduct "may be heightened or increased by homeworking", particularly due to increased use of unmonitored or encrypted apps such as WhatsApp.

The FCA said that using apps such as Whatsapp to share potentially sensitive information can present "significant compliance risks, since firms will be less able to effectively monitor communications using these channels".

In its newsletter, the regulator said it expects firms to "continue to comply with the recording obligations in our Senior Management Arrangements, Systems and Controls sourcebook (SYSC 10A)".

Under SYSC 10A, firms must take 'reasonable steps' to record telephone conversations and keep a copy of electronic communications. They should also identify communications intended to lead up to regulated activities being performed or where there is a reasonable prospect of such activities being performed.

To avoid misconduct, the FCA says firms should have "a rigorous monitoring regime" alongside effective, up to date recording policies.

Firms must also be able to demonstrate to the regulator, on request, that their policies, procedures and management oversight meet the recording rules, including policies and procedures adopted for home working arrangements.

In particular, the FCA said firms should assess policies and controls for the use of privately owned devices to access work-related systems and potentially sensitive or confidential data, to ensure that these provide sufficient scope for effective recording.

The FCA explained: "This might include ensuring clear policies banning the use of privately owned devices for in-scope activities where recording cannot be carried out by the firm. In all cases, arrangements should be clear that new communication mediums must be approved by the firms before being used by employees to conduct business activities."

In its statement, the FCA said: "We have 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. We view these actions as serious and have sought orders preventing such individuals from carrying out these activities in the future. We expect this to remain an area of focus."

Related articles
More from Regulation
Subscribe
to our newsletter

Join a community of over 30,000 intermediaries and keep up-to-date with industry news and upcoming events via our newsletter.