When the coronavirus pandemic began sweeping across the world in the opening months of 2020, the financial industry braced itself for a turbulent year. Markets swung wildly, experiencing both sharp declines and rapid price rises. Investors braving the turmoil were duly rewarded: stock indexes repeatedly closed at fresh highs, while a surge of IPO issuance on US exchanges outpaced the previous record set during the dotcom boom in 1999, according to Dealogic.

At the same time, financial institutions had to quickly adapt to the new operating environment where government-imposed lockdowns meant firms had to shutter offices and introduce remote working.

For broker-dealers in particular, that created a whole raft of compliance issues. Regulatory-mandated supervisory functions that were previously managed on-site now had to be performed remotely. The shift to remote working also impacted the way financial advisors communicated with clients as the use of virtual conferencing and online collaboration platforms proliferated. All of those changes meant broker-dealers became increasingly dependent on technology to help them effectively capture, review and supervise these various forms of electronic communications. In many cases that involved new message types that had previously been prohibited by broker-dealers before the pandemic struck.

Regulators were also forced to amend rules and provide guidance to accommodate the new operating environment. FINRA, for instance, worked with the SEC to grant temporary relief to on-site broker-dealer office inspections for both 2020 and 2021 to help protect the safety and welfare of employees. The disruption caused by Covid-19 also meant broker-dealers had to put their FINRA-mandated business continuity plans (BCPs) into action, many of which needed to be updated due to the severity of the pandemic. Often BCPs had contingency measures in place if a single office was forced to close, but few financial institutions anticipated a scenario where all of their offices would be shut at the same time. Firms were also required to revise their written supervisory procedures to allow for remote oversight of office locations and individuals.

The challenges for compliance officers have been considerable. Take the rise in collaboration platforms. With both client and internal communications spread across multiple third-party applications, data is often siloed, making it harder to monitor and review. In addition, a conversation that might have started on email, may have later switched to, say, Slack, and then been concluded by text, potentially creating gaps in compliance coverage.

While regulators have been supportive around the challenges created by remote working, they have not eased up on their broader compliance requirements. FINRA examinations, for instance, are continuing remotely. FINRA is also likely to increase scrutiny around how broker-dealers keep clients informed about the impact of the pandemic and whether or not clients received appropriate risk disclosures on any new investments. Regulators have also warned they will be paying closer attention to text messaging. So if a broker-dealer has a no-texting policy in place, and examiners find references to text messages in other communications, that will immediately raise a red flag.

Some broker-dealers maintain strict no-texting policies to avoid issues arising from financial advisors interacting with clients by text. Yet there are hidden dangers with no-texting policies, not least that bring-your-own-device trends mean broker-dealers don’t have access to those personal cellphones, making it difficult for compliance officers to enforce the rule.

Advances in technology, however, mean that such no-texting policies are increasingly outdated. Services such as Global Relay Message, for example, allow users to separate business and personal texts on their own devices, ensuring only work-related texts are captured and archived for review.

Using a centralized communications archive also means that broker-dealers can more easily manage the increase in messages sent over collaboration platforms. Not only can they access all content in one place, a platform also eliminates the need to manually convert disparate data sets into a readable format. Global Relay’s archiving and supervision tools cover 60 different data types, from email and instant messaging to social media and trading platforms.

By adopting this type of archiving solution, broker-dealers can set up specific supervision policies that only flag messages that are relevant for compliance purposes. In an increasingly digital world where remote working means the volume of e-comms data continues to grow, effective policy management can help eliminate the noise and ensure compliance teams aren’t wasting their time searching through unrelated messages.

This type of technology will remain essential for broker-dealers in 2021 as the financial industry adjusts to the new ‘normal’. Remote and flexible working options have become a lasting feature of the pandemic, even as the rollout of Covid-19 vaccines will allow for social distancing restrictions to be relaxed. In addition, concerns about the efficacy of remote supervision have been proven wrong. Therefore what started out as a temporary measure will likely result in broker-dealers making permanent changes to their written supervisory procedures.

The future of remote working can also help broker-dealers realize huge savings on real estate costs as they reduce their office footprints in response to financial advisors choosing to work from home. FINRA and the SEC could also potentially amend the definitions of branch offices and offices of supervisory jurisdiction to reflect the new remote-work environment, with technology vendors such as Global Relay continuing to develop tools to help broker-dealers keep pace with the ever-evolving regulatory backdrop.

This article is originally from our US Wealth Technology Landscape Report 2021. Access the full report here.