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Jury's Out on Email Scrutiny

Securities firms claim email surveillance lets them better stay on top of risk exposure, but is it really that effective?

Does email surveillance really work? Securities broker/dealer firms surveyed in a new report say it pays off, but critics say it may also breed a false sense of security.

More than half the respondents to the survey -- 63 percent -- say email surveillance has given them greater visibility into their legal or regulatory risks. But overall, the organizations aren't finding much risky behavior: 96 percent said that less than 1 percent of their messages flagged for review violated federal securities laws or their internal policies.

The survey, conducted by secure email archiving vendor Fortiva and a law firm, Pitney Hardin LLP, queried 100 broker-dealer organizations in North America that monitor and review their employees' email messages, some of which were Fortiva customers. The securities broker/dealer industry is required by the Nasdaq and NYSE to review any electronic correspondence with the public.

Jeffrey Plotkin, a partner with Pitney Hardin, says the results confirm that email surveillance makes sense, and not just for regulated entities. "Every case I've been involved in has been triggered by an email, or smoking gun found," he says. "It just makes good common sense and business sense."

But Khalid Kark, senior analyst with Forrester Research, says email surveillance isn't necessarily effective. There's always a way around these filters and surveillance tools, Kark says, such as a bad guy or employee sending out social security numbers piecemeal in a message so it doesn't get flagged. "It really doesn't help in changing the behavior of the organization," Kark says. "It gives you false sense that you are protecting and blocking [things] and that no one can circumvent it."

The key, he believes, is getting employees on board with email and communications policies rather than filtering and reading their messages. "Do a softer approach with education and training," he says, adding that, if one does decide to conduct email surveillance, one still needs to create an awareness among employees about it.

But Pitney Hardin's Plotkin says he sees a substantial number of banks and non-securities companies starting to add surveillance and monitoring.

He admits email surveillance is costly, especially in the man-hours it takes to review the flagged messages. According to the survey, respondents are spending a median of 12 hours per week for every 100 employees to review 10 percent of their emails. "Even with the technology in place, that's a substantial amount of time," Plotkin says. So for those organizations not required by law to conduct email surveillance, it's a matter of figuring out your risk versus reward, he says.

"But in my experience, avoiding one major scandal or litigation is worth it, and the system and man-hours pay for themselves 10 times over."

Meanwhile, 79 percent of the respondents said their message surveillance process helps deter employees from violating regs and corporate policies. And 26 percent of respondents said their surveillance led to the termination of an employee; 14 percent said they forwarded the flagged messages to a regulatory body or law enforcement; and 12 percent found customer complaints that had not been escalated through the organization.

Most of the respondents, 64 percent, filter all employees' email, while 36 percent just do so for certain groups of employees, such as brokers and advisors.

And interestingly, 76 percent are sifting through internal email, even though the Nasdaq/NYSE rules don't require it. "They are actually going beyond the rules," Plotkin says. "As the [corporate] scandals of 1990s and 2000 showed, the best defense is an offense."

The full report is available at Fortiva's Website.

— Kelly Jackson Higgins, Senior Editor, Dark Reading

  • Fortiva Inc.
  • Forrester Research Inc.
  • Nasdaq
  • New York Stock Exchange (NYSE)