Communications surveillance
Also called eComms surveillance, voice and eComms monitoring, communications monitoring
Communications surveillance is the recording and review of employees' phone calls, emails, chats and other messages to detect market abuse, misconduct and rule breaches. Investment firms must record communications linked to client orders and trading. Surveillance systems scan those records for risk signals and send alerts to compliance analysts.
How it works
Firms capture voice and electronic communications from approved channels, store them in tamper-proof archives and run analytics over them. Lexicons, language models and voice transcription flag phrases or patterns linked to insider dealing, collusion or mis-selling. Analysts review alerts, often alongside trade data, and escalate concerns. Staff must use only approved channels for business communications.
Regulators use recordings as evidence in market abuse cases, so gaps in capture are a breach in themselves. The SEC and CFTC have brought many cases since 2021 against firms whose staff used unapproved messaging apps for business. Under MAR, firms must detect and report suspicious orders and transactions, and communications review is a core input to that duty.
The rules
Requires recording of telephone conversations and electronic communications relating to client orders and dealing on own account.
EU investment firms and credit institutions providing investment servicesRequires systems to detect and report suspicious orders and transactions without delay through STORs.
Persons professionally arranging or executing transactions, and market operatorsRequires firms to record relevant communications, keep them for five years and take steps to stop staff using unrecorded devices.
UK investment firms carrying on relevant activitiesRequires broker-dealers to preserve business communications, including electronic messages, for at least three years.
US broker-dealersCommon questions
What is the difference between communications and trade surveillance?
Trade surveillance analyses orders and transactions for suspicious patterns such as spoofing or insider dealing. Communications surveillance reviews what staff say and write. Many firms link the two so that an unusual trade can be checked against related calls and messages.
What are off-channel communications?
Off-channel communications are business messages sent through apps or devices the firm does not capture, such as personal messaging apps. US regulators have brought numerous cases since 2021 against firms whose staff used them, because the records could not be preserved or reviewed.
How long must recorded communications be kept?
Under MiFID II and FCA rules, relevant records must be kept for five years, and up to seven years if a regulator requests it. US broker-dealers keep business communications for at least three years under SEC Rule 17a-4, the first two in an easily accessible place.
Can AI be used for communications surveillance?
Yes. Firms increasingly use natural language processing and language models to reduce false alerts from keyword lexicons and to cover more languages. They remain responsible for the outcomes, so models are validated and analysts review alerts.
