Fintech startup instant message platform Symphony is hearing the sound of trumpets coming from NY Regulators and Bloomberg-challenger backed by consortium of banks now being questioned about deletion and encryption process.
MarketsMuse curators might be a little slow this week in view of following delayed post regarding the roll-out of the instant message chat platform built by a consortium of top banks and intended to displace their dependence on Bloomberg LP…but better late than never…As Symphony Communications Services prepares to launch its much-anticipated messaging service, New York’s financial regulator is raising questions about whether the system can assure that bank communication records will be preserved for overseers. The following is courtesy of American Banker.
In a letter to Symphony CEO David Gurle (blog post title image), Acting Superintendent of the New York State Department of Financial Services Anthony Albanese asked for further information about Symphony’s document retention capabilities, policies and features.
Noting that “key evidence that regulators used to uncover and investigate” benchmark manipulation schemes has been found in chat rooms, Albanese expressed concern that some banks that are under investigation for rate-rigging are investors in Symphony and have indicated they plan to use it. The letter suggests that before firms begin using a new platform for market related communications, Albanese wants to be sure regulators will still be able to access and audit communications in the event that a firm may be involved in suspicious activity.
The regulator is taking particular interest in “data deletion, end-to-end-encryption, and open source features” of the Symphony platform, the letter said. Albanese said the department would also follow up with banks, requiring them to describe “how they will ensure that messages created using Symphony products will be retained.” The department said it plans to review banks’ responses about their plans to assess whether or not encryption could be used to obstruct regulatory and compliance review, whether firms plan to use deletion capabilities, and whether banks can ensure that employees won’t use open source capabilities “to circumvent compliance controls and regulatory review.”
In an emailed response, Symphony’s Gurley said the platform was designed with compliance in mind, and said the company plans to fully explain Symphony’s technology and its capabilities to regulators.
“Symphony is built on a foundation of security, compliance and privacy features that were built to enable our financial services and enterprise customers to meet their regulatory requirements,” the statement said, according to American Banker. “We look forward to explaining the various aspects of our communications platform to the New York Department of Financial Services.”
Led by Goldman, a group of financial firms invested $66 million in Symphony. The group, in turn, acquired Perzo Inc., a Palo Alto, Calif., company founded in 2012. Goldman, which led the investment among the financial firms, contributed its own internal-messaging developments to the venture.
In addition to Goldman, Bank of America Corp., Bank of New York Mellon Corp., BlackRock Inc., Citadel LLC, Citigroup Inc., Credit Suisse Group AG, Deutsche Bank AG, J.P. Morgan Chase & Co., Jefferies LLC, Maverick Capital Ltd., Morgan Stanley, Nomura Holdings Inc. and Wells Fargo & Co. invested in Symphony.
