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NASD: Yes, Securities Firms Need to Retain IM

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The National Association of Securities Dealers has decided that it’s time to ensure that financial services firms are saving and storing their instant messaging conversations.

The association, an industry self-regulatory group funded by the nation’s securities firms, 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.

“Our members have to have the appropriate systems in place which archive the information” for at least three years, NASD spokesperson Nancy Condon said. “From now on, instant messages are treated like e-mail communications.”

Condon said the notice 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 on Wall Street firms in recent months, when the agency discovered they weren’t archiving their e-mail.

As a result, the new NASD announcement clarifies that the SEC’s and NASD’s provisions on e-mail apply also to instant messaging. Specifically, the notice indicates that electronic communications are subject to NASD Rules 3010 and 3110, which collectively govern internal oversight of employee communications and records retention policies.

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 save and store the instant messages flowing across their networks.

“Instant messaging has become increasingly popular … Just because it’s a more informal method of communication doesn’t mean it’s not subject to same retention requirements,” Condon told “We just wanted to make sure member firms were aware of that.”

The awareness effort by NASD could prove a boon for enterprise IM firms and IM gateway providers, who for some time have been looking to the financial services industry to become their largest customers. Consequently, a number of vendors have for years marketed software targeted to highly regulated industries like the securities sector — with offerings that capture instant messages in an archived format and store those messages securely, enabling regulators or internal compliance officers to retrieve them if the need arises (for instance, in the case of an investigation). Condon also said NASD periodically examines its member companies and their computing systems.

Many of the leading IM gateway vendors, like IMlogic, FaceTime Communications and Akonix meet SEC and NASD requirements, and similar regulations by the New York Stock Exchange. The firms also have partnerships with e-mail and document archiving and security firms — like Iron Mountain, KVS, ClearSwift, Legato, and Zantaz — to provide businesses with a comprehensive IM and e-mail solution.

It’s not clear, however, how securities firms will adapt to the NASD’s Notice — for instance, whether they’ll flock to IM vendors, implement new corporate IM policies that hinder the technology’s spread within the enterprise, or ban IM together.

While Wall Street now plainly responsible for ensuring document-retention compliance, there’s also a parallel burden being placed on IM vendors — to ensure that the sector doesn’t abandon IM and instead, begins to invest in the technology.

Mark Berniker is a writer with Christopher Saunders, managing editor of, contributed to this story.

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