The National Association of Securities
Dealers has decided it’s time to make certain that regulations are
in place requiring financial services firms to save and store instant
The group, a non-profit self-regulatory agency funded by the securities
industry, on Thursday issued a Notice to Members indicating that brokers and
traders need to begin archiving their IM records in much the same way that
they now set aside old e-mail correspondence, as per rules from the NASD and
the Securities and Exchange Commission
“If you are allowing staff to use instant messaging
capture and retain the messages for at least three years,” NASD spokesperson
Nancy Condon said in a statement.
Condon said the announcement was merely a “clarification” of the rules
for the communications of securities dealers — and not in response to any
particular incident, such as the millions of dollars in fines levied by the
SEC in recent months when it discovered that Wall Street firms weren’t
archiving their e-mail.
As a result, the new NASD notice clarifies that the SEC’s provisions
apply also to instant messaging — specifically, that no electronic
communication, of any kind, can violate NASD Rules 3010 and 3110, which together govern the transmission of sales literature and correspondence and document retention.
“Our members have to have the appropriate systems in place which archive
the information,” Condon said. “From now on, instant messages are treated
like e-mail communications.”
There are a number of vendors selling software able to capture instant
messages in an archived format, and securely store those messages, so that
they can be retrieved, if regulators or internal compliance officers want to
see them. Condon said NASD periodically examines its member companies and
their computing systems.
“Firms have to remember that regardless of the informality of instant
messaging, it is still subject to the same requirements as e-mail
communications and members must ensure that their use of instant messaging
is consistent with their basic supervisory and record keeping obligations,”
Mary Schapiro, NASD Vice Chairman and President of Regulatory Policy and
Oversight, said in a press release.
As IM becomes a compelling application in corporate environments, NASD
said it’s just making sure that everyone knows that IM is no different than
any other communications, such as an e-mail or phone conversations.
But by making an official Notice, the NASD is placing the onus on its
more than 5,000 brokerage firm members to make sure they’ve upgraded their
systems to be in position to save and store the potentially huge numbers of
instant messages flowing across their networks.
One company quick to tout its solution to bring firms in compliance with
the new NASD IM rules is IMlogic. The company boasts its IM Manager platform
gives companies full monitoring, security and usage data. In addition to
NASD compliance, IMlogic said its software also helps companies meet the
requirements as outlined by the March 5, 2003 New York Stock Exchange (NYSE)
memo stating that record retention within NYSE Rule 440 and the Securities
Exchange Act Rule 17a-4 apply to all communications, including instant
There are other companies offering solutions to the new NASD IM regulations,
including FaceTime Communications, which this week came out with its IM
Other companies that potentially stand to gain include Communicator Inc.
based in White Plains, New York, and Iron Mountain Inc.
Although NASD members are expected to work to come in compliance with the
Notice, what remains less clear is whether they will devise new corporate IM
policies, which could be more restrictive on the technology’s use within the
The move by NASD brings its 3010 rule in compliance with SEC rules 17 CFR
240 and 17a-4, for monitoring electronic communications in brokerage firms.