Communication via personal text messages or personal email could be a major warning sign that your stockbroker or investment advisor is engaging in investment and securities fraud. While not all uses of personal devices for broker-client contact are cause for concern, these messages are often difficult to regulators and firms to monitor. Because these parties need to monitor communications to prevent fraud both internally and by external enforcement, the use of unapproved devices has become a fineable offense. Regulatory authorities are cracking down on these practices to better protect investors and their holdings. Firms are responding with internal compliance measures—or paying the price.
Morgan Stanley is the latest firm to be slapped with a hefty fine for the use of unapproved personal devices, according to a recent report. In its second-quarter 2022 earnings statement, Morgan Stanley disclosed a $200 million fine “related to a specific regulatory matter concerning the use of unapproved personal devices and the firm’s record-keeping requirements.” This is in response to conversations the firm has had with the Securities and Exchange Commission (SEC) and the Commodities Futures Trading Commission (CFTC).
Morgan Stanley isn’t alone. Since the COVID-19 pandemic has moved more investment professionals to out-of-office settings, the use of personal devices has proliferated. As a result, major investment firms like JPMorgan, Citigroup, Deutsche Bank AG, and HBSC Holdings Plc have all reported a range of related concerns such as fines, regulatory scrutiny, or other internal actions because of regulators’ crackdown on personal device use.