As FTF News is reporting, U.S. Senator Elizabeth Warren is reaching out to six federal regulators via letters to raise concerns that the banks and trading firms using Symphony Communications’ instant messaging and collaboration services will have their interactions hidden from regulatory scrutiny.
First, I am impressed that a U.S. Senator and her staff have been following a Wall Street, financial technology issue so closely. Usually when I reach out to mainstream politicians and media personalities, they often gloss over “techie” issues such as instant messaging and collaboration (although such services are everywhere) and prefer to pontificate or spout glib responses. We are not getting that from Warren.
“When banks fixed interest rates (LIBOR) in direct violation of the law, they used chat rooms and text messages to coordinate their activities, and it was the trail of such messages that permitted regulators both to discover and prosecute these financial crimes, resulting in this case in admissions of wrongdoing and a settlement of $6 billion in fines and penalties,” Warren states in her letter to the regulators.
That is the crux of her concerns — that regulators of all stripes will not have any way to track what is being communicated by parties via the Symphony services.
Symphony officials are pushing back on Warren’s assertions and arguing that their system helps firms with cybersecurity and compliance needs. “The use of Symphony does not change regulators’ ability to obtain messages from our clients. Symphony delivers messages to its clients to download, decrypt, and archive, and they are able to provide those messages to regulators just as they would with other compliant messaging systems,” according to the statement from Symphony officials. “Symphony is innovative because of its ‘end-to-end’ security capability that protects communications from cyber-threats and the risk of a data breach — while safeguarding our customers’ ability to retain records of their messages.”
What likely caught Warren’s attention was the vendor’s claims, including the statement it is “changing the communication paradigm” by preventing “government spying” via eliminating backdoors, and that its data deletion capabilities are “permanent.”
I’m wondering if the vendor’s claims have more to do with overzealous marketing and overstatement as it’s my understanding that Symphony in the financial services realm was mainly targeting the Instant Bloomberg services of the Bloomberg terminal. Given the large number of Instant Bloomberg users, many industry observers note that Symphony’s offerings face an uphill battle for acceptance.
Even so, the Wall Street firms backing the effort and Symphony itself appear to really want to provide an alternative to the very popular Bloomberg “chat tool,” which is integrated with the Bloomberg Professional service and offers “unique chat-parsing technology” to capture chat text and “crucial deal details” that can be sent to trading platforms.
“All chats are archived and auditable, enabling you to fulfill compliance requirements,” according to Bloomberg. “You can share screens, data sets, charts or Excel files through Instant Bloomberg …”
My guess is that there will be more developments as certain aspects of the situation become clear and as regulators decide whether or not to investigate Symphony’s services.
In the meantime, we’ll see if Warren’s efforts backfire and spur greater acceptance of Symphony’s offerings or cause some to hold back from joining the service until it gets the all-clear from regulators.
Need a Reprint?
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