Smarsh Survey Highlights Potential Off-Channel Communications Policy Gap for Firms


In recent years, banks have been fined billions for not adhering to the SEC’s recordkeeping requirements for texting and other digital messages. Even so, many financial services firms are still not being realistic about the threats such messages pose.

That’s one of the key takeaways from a recently published survey by Smarsh, a regtech firm that offers archiving and capture tools for highly regulated businesses.

It found that 47% of firms allow employees to communicate via text message for business purposes – which ignores the reality of how most people like to interact, whether for personal or professional purposes, the study suggested.

The relatively low number begs the question of whether financial services firms have the proper policies and procedures in place to minimize risk. Indeed, as many of the recent penalties demonstrate, it’s likely that bankers, advisors, management and other staff are leveraging communication vehicles they know are prohibited, the company implied.

Smarsh Founder and Chairman Stephen Marsh said that the company has sounded the alarm around texts for years.

“In 2016, we were highlighting this disconnect between reality and what policies were telling us,” Marsh said. “Everyone was using text messaging, no one was archiving it, and at that point, the regulators weren’t really enforcing the rules like they are today. So here they are many years later issuing some gigantic fines.”

Marsh said that firms, based on the survey results, are “a little bit out of touch with reality when you think about just the fact that almost everyone is using text messaging for everything in their lives. It’s not just their personal lives. Business communications are happening over text messaging [whether firms allow it or not].”

Other key findings of the study include:

  • 65% said understanding new regulations was a top concern. That compares to 46% who said the same thing the last time Smarsh conducted a similar survey.
  • 59% of the respondents said cybersecurity-related issues were their top concern. That’s up from 45% in 2020.
  • Even though more than 70% of the respondents said the recent fines have caused them to re-evaluate their existing approach to communications regulations, 90% said they spend less than a quarter of their time creating or adjusting policies and systems to ensure compliance.

Smarsh said the study was based on a 15-question online survey completed by 229 respondents with communication compliance responsibilities conducted in the fall of 2023.