Smarsh Report Identified Electronic Communications Compliance Gaps

Washington, D.C., May 23, 2011 - Smarsh®, the managed service leader in secure, innovative and reliable email archiving and compliance solutions, released a report today at FINRA's 2011 Annual Conference featuring the findings of a survey of compliance professionals in the financial services industry. The results reaffirm the challenges that compliance officers face in today’s demanding regulatory environment, and indicate that extensive compliance gaps exist in electronic recordkeeping and supervision, particularly for new communication tools such as social media and mobile messaging.

"We conducted this research to better understand what compliance officers really think about their electronic communication compliance practices and examination experiences," said Stephen Marsh, CEO and founder of Smarsh. "Whether it's managing the obligations from new regulations like Dodd-Frank and FINRA Regulatory Notice 10-06 or dealing with the growing consumerization of IT, compliance officers must keep pace, or else leave their firms open to a myriad of risks."

Report findings illustrate the increasing burden - and risks - of electronic communications compliance
The compliance landscape for electronic communications is evolving, with the introduction of new regulations, increased enforcement and new forms of communication across new devices. The results of the survey revealed the growing burden of compliance on firms, with nearly 70 percent of respondents reporting that the resources (both time and money) spent on electronic communications-related compliance increased in the past year and 98 percent expecting those resources to increase or stay the same in the next 12 months.

Respondents indicated that not only is the frequency of regulatory examinations increasing, but also their complexity. For example, requests for social media content among respondents who were audited in the last year were 65 percent higher than those audited previously. As new communication channels proliferate in the industry, regulatory bodies like FINRA and the SEC are making them an area of heightened scrutiny in the examination process.

Compliance practice lags for new messaging channels
When asked, respondents demonstrated an accurate understanding of their compliance obligations related to electronic communications; however, a gap existed between what they need to do to comply with these regulatory requirements and what they are actually doing. This disparity was particularly evident with new communications channels, including social media, where policies and systems to monitor and preserve messages from social networking websites like Twitter, LinkedIn and Facebook were significantly less prevalent than those for email. For example, while three-quarters of respondents (75%) acknowledged their regulatory obligation to preserve and monitor social media communications, less than half (42%) had a policy in place and less than one-third (32%) actually retained and supervised those messages.

The impact of this gap is reflected in the level of confidence respondents have when it comes to demonstrating compliance. Eighty-seven percent of respondents were mostly or completely confident in their ability to provide requested emails within a reasonable time frame. In contrast, less than half (46%) had minimal or no confidence in their ability to provide requested social media and mobile messaging data.

About the survey
Between January and April 2011, 223 individuals with compliance-related responsibilities participated in a 29-question survey to identify current trends in electronic message compliance policies and practices. Respondents were drawn from a wide range of firm sizes and job titles, from C-level management to chief compliance officers and compliance department staff. The full survey report is available for download at www.Smarsh.com/ComplianceSurvey.

About Smarsh
Smarsh® provides hosted solutions for archiving electronic communications, including email, instant messaging and social media platforms such as Facebook, LinkedIn and Twitter. Founded in 2001, Smarsh helps more than 10,000 organizations manage and enforce flexible, secure and cost-effective compliance and records retention strategies. For more information, visit www.Smarsh.com or follow Smarsh at www.twitter.com/SmarshInc.