What's Up With WhatsApp and Supervision Obligations? | Blake, Cassels & Graydon LLP

[co-author: Morgan Kearns, Summer Student] The New Self Regulatory Organization (SRO, soon to be called the Canadian Investment Regulatory Organization or CIRO) requires Canadian Dealer Members to keep complete and accurate records of client communications for at least seven years (Rule 3800). This requirement includes electronic communications. Dealer Members are also required to supervise their employees to ensure they are following the rules (Rule 3900). Use of unauthorized communication applications, such as WhatsApp, Signal or text message, are contrary to the Standards of Conduct (Rule 1400). International Enforcement Trend In the United States, the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) have entered into multimillion-dollar settlements for use of off-channel communication applications. Enforcement began last fall, when the SEC announced settlements with a dozen U.S. banks with fines totalling over US$1-billion (see our November 2022 Blakes Bulletin: SEC Crackdown on Record-Keeping Failures Offers a Warning to Canadian Securities Firms.). The SEC and CFTC are also targeting institutions based in the United Kingdom and Canada, along with major private equity firms and hedge funds. Compliance Issues WhatsApp and other messaging platforms allow users to delete conversations after specified periods of time. The difficulty of monitoring, preserving
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