Featured Post from J.S. Held LLC

Off-Channel Communications: How Financial Services Organizations Can Address Regulators’ Latest Target

Mar 27, 2025

3 min

CaptionResizeWrap TextRemove


Off-channel communications (OCC) occur when employees use unapproved and inadequately protected devices – such as personal cellphones – or applications to communicate with co-workers, counterparties and / or clients. Many financial services firms are required to maintain copies of all communications regarding their business, supervise the same, and produce them in response to regulatory requests. Firms cannot meet those compliance obligations when employees resort to unauthorized OCC for business-related matters.


In charging 15 broker-dealers and one affiliated investment advisor in September 2022 with record-keeping violations, the SEC noted that its investigation uncovered employees at all levels of these firms who routinely used text messaging apps on their personal devices to discuss business matters between January 2018 and September 2021 [1]. The firms settled the charges and agreed to pay penalties totaling more than $1.1 billion. Just as important, the firms also agreed to engage independent compliance consultants to ensure the use of OCC meets regulatory standards as part of the settlements.


In a related move [2],  the Commodity Futures Trading Commission (CFTC) ordered 11 financial institutions to pay more than $710 million for recordkeeping and supervision failures for widespread use of unapproved communication methods such as personal texts, WhatsApp, and Signal. Additionally, the Financial Industry Regulatory Authority (FINRA) has also taken action when it comes to OCC.


CaptionResizeWrap TextRemove


Antonio Rega, digital forensics, data governance, privacy, security, emerging technology, and discovery expert with J.S. Held, observes, “While the current administration has loosened certain regulatory enforcement near-term, we continue to observe requests from clients in supporting management of “off-channel” communications, with a particular focus on 3rd party chat messaging platforms on mobile devices, such as Whatsapp. These inquiries include supporting corporate stakeholders with internal auditing of their organizational platforms, policies and procedures.”


By implementing effective processes and utilizing software and outside experts to monitor and detect OCC, broker-dealers, investment advisers, and other financial institutions can reduce the risk of regulatory enforcement and penalties and ensure that they remain in compliance with regulations.


CaptionResizeWrap TextRemove


Steve Strombelline, regulatory and enterprise risk management expert with J.S. Held adds, “Although concerns typically impact broker-dealers, firms outside of financial sectors are looking closely at their messaging processes as well, which is advisable."







In addition to guaranteeing that these communications are properly documented and retained, the regulations are set up to prevent the use of OCC to manipulate securities transactions or commit fraud and to ensure that it is not used to violate any other securities laws. Firms’ supervisory procedures must be reasonably designed to detect for OCC when they monitor for such activity.


The following article discusses the risks that OCC pose for financial services firms, especially as the SEC, FINRA, and the CFTC have made it clear that they are now targeting firms throughout the industry about their OCC to see if they are recording and preserving business information according to regulations.


The piece also explains how firms, including broker-dealers of all sizes, should manage their OCC to ensure that they and their employees comply with federal securities laws and regulations.


Finally, the authors address the complexity related to the collection of OCC in response to regulatory enforcement investigative requests. As the fines and settlements between those firms and the SEC exemplify, financial services firms of all sizes need to take this regulatory focus seriously and take the proactive step of engaging an independent third-party with expertise and experience in both digital forensics and compliance issues.


To read the full article and learn more about the risk of off-channel communications and how companies should manage their OCC to remain compliant, click on the button below:


Read the Article Here


To connect with Antonio Rega simply click on his icon now.


To arrange a conversation with Steve Strombelline or any other media inquiries - contact :


Kristi L. Stathis, J.S. Held

+1 786 833 4864

Kristi.Stathis@JSHeld.com


References

[1] https://www.sec.gov/news/press-release/2022-174

[2] https://www.cftc.gov/PressRoom/PressReleases/8599-22

You might also like...

Check out some other posts from J.S. Held LLC

1 min

Global Honors Highlight J.S. Held’s Unmatched Technical and Advisory Expertise

J.S. Held proudly celebrates the numerous industry and expert recognitions earned throughout 2025. As a global consulting firm, J.S. Held continues to be acknowledged for its deep financial, technical, and scientific expertise, with leading outlets highlighting the firm’s capabilities across investigations, risk advisory, forensics, turnaround and restructuring, business intelligence, and litigation support. The firm’s curated team of entrepreneurs — each with an unrivaled understanding of both tangible and intangible assets — reflects a collective strength that is recognized worldwide. Beyond organizational achievements, J.S. Held’s experts received individual distinctions that further demonstrate their standing as leaders within their respective fields. Industry publications and ranking bodies honoured these specialists for excellence in arbitration, construction and engineering, environmental consulting, forensic accounting, investigations, litigation support, intellectual property, specialty finance, and a wide range of other highly specialized domains. Together, these recognitions underscore J.S. Held’s commitment to delivering trusted insight and unparalleled expertise as clients navigate increasingly complex challenges. In a rapidly evolving business landscape, the firm remains dedicated to providing informed, innovative, and practical solutions that enable organizations to move forward with confidence. Click on the link below to learn more about our recognition and respective areas of expertise: Expert recognition by notable organizations serves as a further testament to J.S. Held's agile, collaborative, creative, and client-centric team, reflecting the trusted advisor role the firm has earned over the last 50 years. For any media inquiries, contact: Kristi L. Stathis, J.S. Held +1 786 833 4864 Kristi.Stathis@JSHeld.com

2 min

Strategies for Interacting with Federal and State Governments in Turbulent Times

From foreign investment scrutiny to trade fraud enforcement, shifting federal and state priorities are reshaping corporate compliance. At the Federation of Defense & Corporate Counsel (FDCC) 2025 Corporate Counsel Symposium (CCS) in Chicago, J.S. Held compliance, risk, and investigations expert Greg Esslinger joined a panel to discuss 'Strategies for Interacting with Federal and State Governments in Turbulent Times,' focusing on the current climate for mergers, acquisitions, and corporate compliance. Below, he shares key takeaways from the session designed to help businesses refine their M&A techniques, navigate high-stakes transactions and investigations, and realize value amid global government shifts. REGULATORY EXPECTATIONS ARE SHIFTING QUICKLY Government agencies are adjusting their enforcement priorities, with increased scrutiny on foreign investments, beneficial ownership, and emerging areas like healthcare fraud, sanctions and tariffs, and foreign terrorist organizations (FTOs). M&A REQUIRES STRATEGIC RISK MANAGEMENT  In today’s volatile regulatory climate, mergers, acquisitions, and joint ventures demand enhanced due diligence. Tariffs, supply chain disruptions, and national security concerns are reshaping how companies value and structure deals. MULTI-JURISDICTIONAL OVERSIGHT IS INCREASING State and international enforcement and regulatory agencies are ramping up efforts, bringing heightened attention to data privacy, private litigation, whistleblower actions, and cross-border investigations, which carry potential reputational and financial risk. INVESTIGATIONS DEMAND AGILITY AND FORESIGHT As enforcement priorities shift across areas like customs, healthcare, and workplace equity initiatives, companies face growing exposure to government inquiries. Preparation and adaptability are key to mitigating risk. For more information about J.S. Held's investigations and compliance consulting expertise: To explore the topic further, simply connect with Greg through his icon below.

2 min

Detecting Fraud Using Emerging Technology: Innovating Beyond Traditional Controls

Fraud and financial crime are evolving at a pace that challenges even the most established detection systems. From cyber-enabled schemes and complex financial misappropriations to subtle internal manipulations, traditional audit and compliance methods are often too slow or too narrow to keep up. In a world where billions of data points can hide a single irregularity, the investigative advantage now lies in speed, intelligence, and technological adaptability. J.S. Held’s Ken Feinstein recently authored an article exploring how artificial intelligence, machine learning, and advanced data analytics tools are transforming how organizations uncover and prevent fraud. In his piece, “Detecting Fraud Using Emerging Technology: Don’t Be Afraid to Innovate,” Feinstein illustrates how the integration of digital investigation techniques — from automation to predictive analytics — is reshaping the fraud-detection landscape, helping companies not just react to wrongdoing but anticipate and deter it. Ken Feinstein specializes in investigative data analytics and has over 25 years of experience. He provides data analytics solutions spanning multiple sectors, including retail and consumer products, life sciences, technology, financial services, and industrial products. His clients include law firms and Fortune 500 legal and compliance teams for whom he delivers large-scale, complex investigations, regulatory response matters, proactive anti‐fraud efforts, and compliance programs. View his profile here Why This Matters As fraudsters exploit digital tools and globalized networks, detection efforts must evolve in kind. Regulators expect faster, data-driven investigations, and boards demand real-time risk visibility. Those who innovate with AI-enabled detection and forensic analytics are better positioned to protect assets, reputation, and shareholder trust. Looking to know more? Connect with Ken Feinstein today by clicking on his icon below.

View all posts
Powered by