Asset managers on alert after ‘WhatsApp’ crackdown on banks

Regulations governing financial institutions have progressively been tightened since the global financial crisis of 2007-9 and companies have long recorded staff communications to and from office phones. (Shutterstock/File)
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Updated 18 August 2022

Asset managers on alert after ‘WhatsApp’ crackdown on banks

  • Demand for software to record, archive messaging on the rise
  • Continued remote working underscores risk of compliance missteps with banks paying hundreds of millions of dollars in regulatory fines

LONDON: Asset managers are tightening controls on personal communication tools such as WhatsApp as they join banks in trying to ensure employees play by the rules when they do business with clients remotely.
Regulators had already begun to clamp down on the use of unauthorized messaging tools to discuss potentially market-moving matters, but the issue gathered urgency when the pandemic forced more finance staff to work from home in 2020.
Most of the companies caught in communications and record-keeping probes by the US Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) have been banks — which have collectively been fined or have set aside more than $1 billion to cover regulatory penalties.
But fund firms with billions of dollars in assets are also increasing their scrutiny of how staff and clients interact.
“It is the hottest topic in the industry right now,” said one deals banker, who declined to be named in keeping with his employer’s rules on speaking to the media.
Reuters reported last year the SEC was looking into whether Wall Street banks had adequately documented employees’ work-related communications, and JPMorgan was fined $200 million in December for “widespread” failures.
German asset manager DWS said last month it had set aside 12 million euros ($12 million) to cover potential US fines linked to investigations into its employees’ use of unapproved devices and record-keeping requirements, joining a host of banks making similar provisions, including Bank of America, Morgan Stanley and Credit Suisse.
Sources at several other investment firms — described in the financial community as the ‘buy-side’ — including Amundi, AXA Investment Management, BNP Paribas Asset Management and JPMorgan Asset Management, told Reuters they have deployed tools to keep all communications between staff and clients compliant.
Spokespeople for the SEC and CFTC declined to comment on whether their investigations could extend beyond the banks, but industry sources expect authorities to cast their nets wider across the finance industry and even into government.
Last month Britain’s Information Commissioner’s Office (ICO), the country’s top data protection watchdog, called for a review of the use of WhatsApp, private emails and other messaging apps by government officials after an investigation found “inadequate data security” during the pandemic.
Regulations governing financial institutions have progressively been tightened since the global financial crisis of 2007-9 and companies have long recorded staff communications to and from office phones.
This practice is designed to deter and uncover infringements such as insider trading and “front-running,” or trading on information that is not yet public, as well as ensuring best practice in terms of treatment of customers.
But with thousands of finance workers and their clientele still working remotely after decamping from company offices at the start of the pandemic, some sensitive conversations that should be recorded remain at risk of being inadvertently held over informal or unauthorized channels.
Brad Levy, CEO of business messaging software firm Symphony, said concerns on managing that risk had driven a surge in interest for software upgrades that make conversations on popular messenging tools including Meta Platforms’ WhatsApp recordable.
“Most believe the breadth of these investigations will go wider as they go deeper,” Levy said.
“Many markets participants have retention and surveillance requirements so are likely to take a view, including being more proactive without being a direct target.”
He said Symphony’s user base has more than doubled since the pandemic to 600,000, spanning 1,000 financial institutions including JPMorgan and Goldman Sachs.
Symphony peer Movius also said its business lines specializing in making WhatsApp and other tools recordable have more than doubled in size in the space of a year, with sales to asset managers a growing component.
“Many on the buy-side have recognized that you can’t just rely on SMS and voice calls,” said Movius Chief Executive Ananth Siva, adding that the company was also seeking to work with other highly-regulated industries including health care.
Movius software integrates third-party communications tools such as email, Zoom, Microsoft Teams and WhatsApp into one system that can be recorded and archived as required, he said.
Amundi, AXA IM, BNPP AM and JPMorgan Asset Management all confirmed they had adopted Symphony software but declined to comment on the full breadth of services they used or when these had been rolled out.
Amundi and AXA IM both confirmed they used Symphony services for team communications, while AXA IM also said they used it for market information.
Amundi, BNPP AM and JP Morgan AM declined to comment on whether they thought regulators would seek to investigate record keeping at asset managers after enforcement actions against the banks were completed.
A spokesperson for BNPP AM said it had banned the use of WhatsApp for client communications due to compliance, legal and risk considerations including General Data Protection Regulation (GDPR).

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Pakistan's PM orders restoration of Wikipedia 'with immediate effect'

Updated 06 February 2023

Pakistan's PM orders restoration of Wikipedia 'with immediate effect'

  • Pakistan blocked Wikipedia last week on grounds it failed to remove "blasphemous content" from its platform
  • "Unintended consequences" of blanket ban on Wikipedia outweigh its benefits, says committee formed by PM Sharif

ISLAMABAD: Prime Minister Shehbaz Sharif on Monday ordered the restoration of online encyclopedia Wikipedia "with immediate effect", a couple of days after it was banned for uploading "blasphemous" content on its platform. 

Pakistan last week banned Wikipedia across the country, accusing the platform of deliberately not removing blasphemous content. Pakistan's telecommunication regulator said it provided the platform multiple chances to present its stance in a hearing but it failed to do so. 

Blasphemy is a sensitive issue in Muslim-majority Pakistan, and social media giants Facebook and YouTube have previously been banned for publishing content deemed sacrilegious.

The move drew flak from digital rights activists and proponents of free speech, who pointed out how the move would deprive millions across the country of free knowledge and research material. 

According to a statement by the Prime Minister's House (PMO), the premier constituted a three-member ministerial committee comprising the ministers of law, information and economic affairs to deliberate on the matter. 

The committee said Wikipedia is a "useful" website that supports the dissemination of knowledge and information for the general public. "Blocking the site in its entirety was not a suitable measure to restrict access to some objectionable contents / sacrilegious matter on it," the committee said. 

The committee said further that the "unintended consequences" of the blanket ban outweigh its benefits.

"Based on the above recommendation, the Prime Minister is pleased to direct that the website (Wikipedia) may be restored with immediate effect," the PMO stated.

The statement said that the prime minister had constituted a separate cabinet committee comprising the ministers of IT, law, information, commerce and communications that may "co-opt any expert members or seek opinion from expert individuals/organizations to reach its findings."

The committee would review the suitability of the PTA's action of blocking Wikipedia to restrict access to blasphemous content. It would also explore and recommend alternative measures to remove or block blasphemous material on Wikipedia and other online sites and provide any other recommendations to control unlawful online content "in a balanced manner."

In September 2020, Pakistan blocked Tinder, Grindr and three other dating apps for not adhering to local laws, with the Pakistan Telecommunication Authority (PTA) saying it had taken the decision to curb the “negative effects of immoral/indecent content streaming.”


Tesla’s Elon Musk found not liable in trial over 2018 ‘funding secured’ tweets

Updated 05 February 2023

Tesla’s Elon Musk found not liable in trial over 2018 ‘funding secured’ tweets

  • Tesla shareholders claimed Musk misled them when he tweeted on Aug. 7, 2018, that he was considering taking the company private at $420 per share
  • Shares of Tesla rose 1.6 percent in after-hours trading following the verdict and Musk tweeted that "he wisdom of the people has prevailed"

SAN FRANCISCO: A US jury on Friday found Tesla Inc. CEO Elon Musk and his company were not liable for misleading investors when Musk tweeted in 2018 that he had “funding secured” to take the electric car company private.
Plaintiffs had claimed billions in damages and the decision also had been seen as important for Musk himself, who often takes to Twitter to air his views.
The jury came back with a unanimous verdict roughly two hours after beginning deliberations.
Musk was not present in court when the verdict was read but soon tweeted that he was “deeply appreciative” of the jury’s decision.
“Thank goodness, the wisdom of the people has prevailed,” he said.
Nicholas Porritt, a lawyer for the investors, said in a statement, “We are disappointed with the verdict and are considering next steps.”
Shares of Tesla rose 1.6 percent in after-hours trading following the verdict.
“A dark chapter is now closed for Musk and Tesla,” Wedbush analyst Dan Ives said. Ives added that some Tesla investors feared Musk might have to sell more Tesla stock if he lost.
The world’s second-richest person has previously created legal and regulatory headaches through his sometimes impulsive use of Twitter, the social media company he bought for $44 billion in October.
Minor Myers, who teaches corporate law at the University of Connecticut and who had previously called the investors’ case strong, called the outcome “astounding.”
The US anti-securities fraud law “has always been thought to be this great bulwark against misstatements and falsehoods,” he said. “This outcome makes you wonder if it is up to the job in modern markets,” he said, adding that Musk himself was likely to “double down” on his communication tactics after the verdict.
Musk’s attention has been divided in recent months between Tesla, his rocket company SpaceX and now Twitter. Tesla investors have expressed concerns that running the social media company has taken up too much of his focus.
’Bad word choice’
Tesla shareholders claimed Musk misled them when he tweeted on Aug. 7, 2018, that he was considering taking the company private at $420 per share, a premium of about 23 percent to the prior day’s close, and had “funding secured.”
They say Musk lied when he tweeted later that day that “investor support is confirmed.”
The stock price soared after the tweets and then fell again after Aug. 17, 2018, as it became clear the buyout would not happen.
Porritt during closing arguments said the billionaire CEO is not above the law, and should be held liable for the tweets.
“This case ultimately is about whether rules that apply to everyone else should also apply to Elon Musk,” he said.
Musk’s lawyer Alex Spiro countered that Musk’s “funding secured” tweet was “technically inaccurate” but that investors only cared that Musk was considering a buyout.
“The whole case is built on bad word choice,” he said. “Who cares about bad word choice?“
“Just because it’s a bad tweet doesn’t make it fraud,” Spiro said during closing arguments.
An economist hired by the shareholders had calculated investor losses as high as $12 billion.
During the three-week trial, Musk spent nearly nine hours on the witness stand, telling jurors he believed the tweets were truthful. 
Musk later testified that he believed he could have sold enough shares of his rocket company SpaceX to fund a buyout, and “felt funding was secured” with SpaceX stock alone.
Musk testified that he made the tweets in order to put small shareholders on the same footing as large investors who knew about the deal. But he acknowledged he lacked formal commitments from potential backers.
The verdict is another victory for Musk and his lawyer Spiro after they won a defamation lawsuit against the billionaire in 2019 over his tweet calling a cave explorer a “pedo guy.” 


ChatGPT maker fields tool for spotting AI-written text

Updated 01 February 2023

ChatGPT maker fields tool for spotting AI-written text

  • But the company said the detection tool is still "imperfect"

SAN FRANCISCO: Creators of a ChatGPT bot causing a stir for its ability to mimic human writing on Tuesday released a tool designed to detect when written works are authored by artificial intelligence.
The announcement came amid intense debate at schools and universities in the United States and around the world over concerns that the software can be used to assist students with assignments and help them cheat during exams.
US-based OpenAI said in a blog post Tuesday that its detection tool has been trained “to distinguish between text written by a human and text written by AIs from a variety of providers.”
The bot from OpenAI, which recently received a massive cash injection from Microsoft, responds to simple prompts with reams of text inspired by data gathered on the Internet.
OpenAI cautioned that its tool can make mistakes, particularly with texts containing fewer than 1,000 characters.
“While it is impossible to reliably detect all AI-written text, we believe good classifiers can inform mitigations for false claims that AI-generated text was written by a human,” OpenAI said in the post.
“For example, running automated misinformation campaigns, using AI tools for academic dishonesty, and positioning an AI chatbot as a human.”
A top French university last week forbade students from using ChatGPT to complete assignments, in the first such ban at a college in the country.
The decision came shortly after word that ChatGPT had passed exams at a US law school after writing essays on topics ranging from constitutional law to taxation.
ChatGPT still makes factual mistakes, but education facilities have rushed to ban the AI tool.
“We recognize that identifying AI-written text has been an important point of discussion among educators, and equally important is recognizing the limits and impacts of AI generated text classifiers in the classroom,” OpenAI said in the post.
“We are engaging with educators in the US to learn what they are seeing in their classrooms and to discuss ChatGPT’s capabilities and limitations.”
Officials in New York and other jurisdictions have forbidden its use in schools.
A group of Australian universities have said they would change exam formats to banish AI tools and regard them as cheating.
OpenAI said it recommends using the classifier only with English text as it performs worse in other languages.

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Russian court fines Amazon’s Twitch $57,000 over Ukraine content

Updated 31 January 2023

Russian court fines Amazon’s Twitch $57,000 over Ukraine content

  • Court said Twitch failed to remove “fakes” from its platform

LONDON: A Russian court on Tuesday fined streaming service Twitch 4 million roubles ($57,000) for failing to remove what it said were “fakes” about Russia’s military campaign in Ukraine, the Interfax news agency reported.
Twitch, which is owned by Amazon, did not immediately respond to a request for comment.
Moscow has long objected to foreign tech platforms’ distribution of content that falls foul of its restrictions, with Russian courts regularly imposing penalties.


Facebook seeks to block $3.7 bln UK mass action over market dominance

Updated 30 January 2023

Facebook seeks to block $3.7 bln UK mass action over market dominance

  • Tech giant claims lawsuit is “entirely without merit,” ignore added “economic value”

LONDON: Facebook on Monday asked a London tribunal to block a collective lawsuit valued at up to 3 billion pounds ($3.7 billion) over allegations the social media giant abused its dominant position to monetise users’ personal data.
Meta Platforms Inc, the parent company of the Facebook group, is facing a mass action brought on behalf of around 45 million Facebook users in Britain.
Legal academic Liza Lovdahl Gormsen, who is bringing the case, said Facebook users were not properly compensated for the value of personal data that they had to provide to use the platform.
Her lawyers said users should get compensation for the economic value they would have received if Facebook was not in a dominant position in the market for social networks.
But Meta said the lawsuit was “entirely without merit” and should not be allowed to proceed. Its lawyers said the claimed losses ignore the “economic value” Facebook provides.
Lovdahl Gormsen’s lawyers on Monday asked the Competition Appeal Tribunal to certify the case under the UK’s collective proceedings regime – which is roughly equivalent to the class action regime in the United States.
A decision to certify collective proceedings will depend on whether the tribunal decides that the individual cases can appropriately be dealt with together, rather than on their merits.
Ronit Kreisberger, representing Lovdahl Gormsen, told the tribunal that “Meta’s data practices violate the prohibition on abusive conduct by dominant firms”.
“There is unquestionably a case for Meta to answer at trial,” Kreisberger argued.
But lawyers representing Meta said the lawsuit wrongly assumes that any “excess profits” it might make equates to a financial loss suffered by individual Facebook users.
This approach “takes no account whatsoever of the significant economic value of the service provided by Facebook”, Marie Demetriou said in court documents.
She said Lovdahl Gormsen’s estimate of potential claimants’ total losses – 3 billion pounds, including interest – is “at the very least wildly inflated”.