FINRA Report Highlights New Focus On “Game-Like” Trading Apps
Today in “missing the lede” news…
Rather than targeting the people involved in potentially colluding and manipulating the market during last week’s GameStop run up, it appears FINRA is instead focusing their efforts on “digital platforms” and “game-like” apps. Because, we all know, it’s the platform that colluded on message boards and placed those trades, right?
Nevermind the fact that de facto WallStreetBets leader Deepfuckingvalue, who we profiled here, appeared to be using an e-Trade account while trading, FINRA’s 2021 Examinations and Priorities report — which summarizes exam findings from 2020 — turns the focus to platforms with “game-like” features, according to ThinkAdvisor and Law 360.
The report says: “online broker-dealers’ apps, as well as those offered by other financial services and consumer-oriented businesses, include interactive and ‘game-like’ features, as well as related forms of advertising and marketing.”
Those features “affect many aspects of how firms interact and communicate with customers, from initial advertisements through the opening of accounts, recommendations and the presentation of different investment choices,” the report notes. It then says it found that broker-dealers “had failed to supervise and maintain policies and procedures for digital communications.”
FINRA says some broker dealers are “not maintaining policies and procedures to reasonably identify and respond to red flags — such as customer complaints, representatives’ email, [outside business activity] OBA reviews or advertising reviews — that registered representatives used impermissible business-related digital communications methods, including texting, messaging, social media, collaboration apps or ‘electronic sales seminars’ in chatrooms.”
Robert Cruz, vice president, Information Governance for technology provider Smarsh, added: “FINRA highlights the need to inspect for outside business activities (OBA), which is significant given the recent news surrounding GameStop.”
Commenting on Reddit user Deepfuckingvalue and his reported recent employment at Mass Mutual, Cruz said: “Supervisory technologies should be able to identify communications fragments indicating that may be indicators of employee misconduct — whether those are happening on approved networks, or may be occurring on prohibited tools.”
He continued, stating that many firms “have struggled in defending the line between personal and business communications — in particular since we all spend nearly all of our time on mobile apps and video conferencing technologies. Employees need to get their jobs done, and absent of more explicit guidance from firms, can easily gravitate toward tools that they are familiar with and are easily accessible, such as Signal, Telegram, WhatsApp and others.”
Cruz has seen “many firms strengthen their policies and due diligence processes to make that there is clear guidance on what tools are permitted, including inspecting new features in order to determine if sufficient mechanisms exist to capture those communications before they are allowed to be used for business purposes,” he concluded.
Between FINRA focusing on platforms and yesterday’s call by Maxine Waters to drag GameStop executives before congress at upcoming hearings (as if the company had anything to do with the stock’s move), we are almost guaranteed that lawmakers and regulators will find everything but the reason for last week’s chaos. We’re certain it’ll be a Congressional hearing that exemplifies the effectiveness of congressional hearings.
Thu, 02/04/2021 – 10:10