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As Voice and Data Merge, Archiving Gets More Complicated
February 27, 2006
Combine Internet telephony and cheap storage and you get the ability to store virtually all of your telephone conversations. But with that comes the responsibility to deliver those conversations to regulators or courts if they demand it. "Voice retention can be a double-edged sword if it's not accompanied by retrieval technology and employee training," says Kevin Kalinich, professional risks solutions director at Aon Corp., a risk management consultant and insurance company based in Chicago.
Since securities brokers are not usually legally required to archive voice conversations, most don't have policies and procedures in place to respond to discovery requests during litigation. Instead, procedures are designed to accommodate business needs such as retrieving a conversation in order to confirm a customer's order. For such a need, a time and date stamp might suffice. But if a company is the subject of a serious complaint, such as sexual harassment, a court may request copies of all relevant conversations.
Without adequate search and retrieval technology, finding those conversations might become laborious--and expensive. Recent court cases have demonstrated the risk of failing to provide documents in a timely fashion. For example, a Florida state court judge instructed a jury last spring to assume that Morgan Stanley had helped defraud financier Ronald Perelman when the investment banking firm failed to submit all its e-mails related to the case. Perelman was awarded $1.58 billion in a verdict that Morgan is now appealing.
Experts say that securities firms that save voice recordings should have policies, procedures and systems for handling them.
Kalinich says his firm has assessed network risks at many financial firms. Most brokerages record phone calls, but they don't have policies to cover their retention and deletion, as they do with e-mail and instant messaging. "It's important to have a policy and to have consistent treatment across the organization, whether recording, erasing or transferring to text," he notes.
Rules expanding the definition of electronic communications to include voice might be coming sooner rather than later, Kalinich adds: "There's already discussion at NASD and the SEC, and pressure from consumer advocacy groups to include voice conversations. Wall Street firms are arguing that they don't have the technology to comply with it yet, but there's already pressure."
Meanwhile, technology is removing the distinction between voice and data communications. It is becoming routine for e-mail systems to permit voice messages to be attached to e-mails, and this automatically puts them within current document retention guidelines. Many IM systems allow users to quickly switch back and forth between Internet-based voice conversations and text. So far, no one has tested whether these communications need to be archived, says Phil Dina, securities regulation practice leader at BusinessEdge Solutions, a financial services consulting firm based in East Brunswick, N.J. that counts Bear Stearns and UBS among its investment banking clients.
But if they are being stored, an aggressive attorney can go after them. Dina says, "My advice to a firm is that if the data is no longer needed, I would literally have that hard drive immediately destroyed. Nothing good can come of it."