Labour MEP Anneliese Dodds is calling for tighter regulation of new financial messaging platform Symphony and claims British and French watchdogs are currently investigating it.
Dodds this week sent a letter (which you can read in full below) to Jonathan Hill, European Commissioner for financial services, and Steven Maijoor, head of the regulator ESMA (the European Securities and Markets Authority), regarding what she claims is the “danger [Symphony] poses to regulation and transparency.”
Symphony is a messaging platform with secure encryption, designed for financial services firms. It’s the brainchild of Goldman Sachs, which last year acquired and rebranded Silicon Valley chat platform Perzo.
Observers say the project is meant to lessen banks’ reliance on Bloomberg after the company admitted, in 2013, that at least one reporter at Bloomberg News had used its terminals to monitor login activity in a bid to break news stories, The New York Times reported. At the time, editor in chief of Bloomberg News, Matthew Winkler, apologised for the error.
Symphony CEO David Gurle told BI last year the platform is less like a Bloomberg terminal and actually more like a secure Slack, meant to do away with work email.
Symphony got into trouble last year with the New York regulator over initial promises, since reversed, that it would delete data for clients. Regulators feared this would let banks cover up bad deeds. Chat logs have been crucial to Libor fixing trials, for example. You don’t want those getting deleted.
‘Not keeping with the principle of regulatory compliance’
Dodds first raised the issue of Symphony’s data deletion promise with European regulators and legislators in a letter last October. Commissioner Hill assured her in his reply that Symphony has to comply with regulation requiring banks to hold on to records for a minimum of 5 years and decrypt them regulators on request.
But Dodds says in her second letter that she wants “additional safeguards and guarantees.” She points to the early deletion promise and says: “That is a very worrying way to advertise a business, and not one that seems in keeping with the principle of regulatory compliance.”
She adds: “While one should not presume guilt, regulators must ensure there is no complacency when trusting banks to maintain records from software that was advertised on its site as saving banks “billions of dollars in fines”.
“It is worth remembering that the same banks that paid fines during the LIBOR scandal are now investing in, and utilising, the Symphony Platform.”
Symphony, which is reportedly worth $1 billion, has raised more than $160 million from investors including Google, UBS, Societe Generale, Goldman Sachs, JPMorgan, Bank of America, Citigroup, Credit Suisse, Deutsche Bank, and Wells Fargo.
Dodds wants European regulators to force banks that use the platform to leave a decryption key with a third party, something the New York regulator has enforced. At the moment, the bank just hangs on to the key and decodes messages for watchdogs upon request.
Dodds claims in her letter that “both the British and French regulators are beginning investigations” into Symphony, which is likely to be the Financial Conduct Authority (FCA) in the UK and the Autorité des marchés financiers (AMF) in France. Dodds’ office declined to comment further when contacted by BI this week.
The FCA told BI it could not comment on Symphony but a spokesperson said that in general:
Firms that are authorised by the FCA and use messaging platforms are subject to a range of FCA requirements including recording relevant conversations. In particular firms are required to record ‘relevant communications’ including voice conversations and other electronic communications (including instant messaging and emails) that involve the receipt of client orders and negotiating, agreeing and arranging transactions in the equity, bond and financial and commodity derivatives markets and communications in relation to proprietary trading and other principal dealing and agency broking.
MiFID II will extend the UK’s existing record keeping requirements for telephone conversations and electronic communications from six months to a minimum of five years once implemented.
The AMF declined to comment. French banks and other firms under its jurisdiction are subject to the same European record keeping requirements as the FCA outlined.
Symphony declined to comment on Dodds’ letter when contacted by BI this week but a spokesperson pointed to a blog post on the company’s regulatory compliance features from last August and on its agreement with the New York Department of Financial Services.
Here is Dodds’ letter in full: