Wall Street to Get Guidelines on E-Mail

[R.A. Hettinga]

<http://www.nytimes.com/2007/06/14/technology/14devices.html?dlbk=&pagewanted=print>

The New York Times

June 14, 2007

Wall Street to Get Guidelines on E-Mail

By MICHAEL J. de la MERCED

Try to imagine Wall Street getting through one day without cellphones,
BlackBerrys or sending messages through Bloomberg terminals. No, really.

Every day, potentially millions of dollars are at stake as electronic
communications whiz through the air. Yet that ever-expanding number of ways
to communicate - like hand-held BlackBerrys, text messages and instant
messaging - have raised concerns about the spread of confidential
information through unsecure devices.

In response, the industry's two self-policing groups, N.Y.S.E. Regulation
and NASD, are expected today to release proposed guidelines for the
regulation of written electronic communications, including internal and
external exchanges.

The guidelines represent nearly two years of work by a committee of
N.Y.S.E. Regulation and NASD, Wall Street firms and lawyers, as well as
contributions by the Securities and Exchange Commission.

They are intended to clarify how forms of communication unimaginable when
the rules were last revised, in 1998, fit into existing regulations, said
Grace Vogel, the executive vice president of N.Y.S.E. Regulation who led
the committee.

But some outside the committee said that regulation and enforcement would
undoubtedly follow.

"I expect that the codification of these best practices has little
practical effect other than in bringing regulatory actions against their
members," Ron S. Geffner, a lawyer at Sadis & Goldberg who previous worked
at the S.E.C., said.

James D. Cox, a professor of corporate and securities law at Duke, said the
new proposal was a small but important step.

"It won't be the last whack at the problem," Professor Cox said. "But it's
a modest beginning."

Though Wall Street has learned the consequences of paying too little
attention to messages zipping through its corporate pipelines - ask Merrill
Lynch about Henry Blodget - other ways of communicating have cropped up
faster than regulators have been able to address them.

What has emerged in the latest revision is a series of recommendations on
how to monitor text-based communications from these firms. The overarching
principle: if firms cannot supervise or review the messages, or if the
sender cannot be identified, they should consider blocking them from the
workplace.

The goal was not to deprive bankers, traders and brokers of their
BlackBerrys or market terminals, said Ben A. Indek, a partner at Morgan,
Lewis & Bockius and a committee member, but to offer companies guidance on
how to monitor their use.

While many firms have already addressed some of these concerns - like
blocking sites for personal e-mail messages - Ms. Vogel said that many Wall
Street executives felt that regulators needed to address the issue more
broadly.

In addition, the guidelines suggest that brokers should limit the use of
their personal cellphones and that companies should not allow the use of
instant messaging or pin messaging if they cannot monitor it properly.

Among the discussions at the inaugural meeting was defining "electronic
communications." The task took three hours, Ms. Vogel said.

One of the ground rules the committee worked under was that any proposals
would emerge as principles rather than rules.

The decision, members said, underscored concerns about cost, as smaller
firms worried that they could not institute the types of systems used at
larger companies. Instead, the proposal urges firms to consider what is
appropriate for their size and business models.

"We didn't necessarily want mechanistic guidance, that you must look at X
number of e-mails," Marc Menchel, executive vice president and general
counsel at NASD, said.

Another reason was a recognition that a list of guidelines could more
easily accommodate the rapid evolution of technology. Rather than a list
that prohibited means of communication, the guidelines lay the groundwork
for a wider scope, not limiting regulators from addressing the BlackBerrys
of tomorrow.

Gaining consensus within the committee was challenging, especially on the
inclusion of internal e-mail communications, an item flagged by NASD and
the S.E.C. Several firms pointed out that certain kinds of messages, like
those between bankers and analysts, are prohibited.

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R. A. Hettinga <mailto: rah at ibuc.com>
The Internet Bearer Underwriting Corporation <http://www.ibuc.com/>
44 Farquhar Street, Boston, MA 02131 USA
"... however it may deserve respect for its usefulness and antiquity,
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