WhatsApp: The Unofficial Boardroom?

WhatsApp: The Unofficial Boardroom?

WhatsApp: The Unofficial Boardroom? 1200 630 Sean Cullen

Instant messaging apps are neither a new nor novel invention. For quite some time, they have become an unofficial feature of many people’s working habits – why send a formal email when a simple and immediate WhatsApp message will suffice? Why risk an important and timely request getting lost in the “unread”?

The informality and accessibility of instant messaging seems, on the surface of it, like a practical and efficient solution. It should therefore come as no surprise that in 2020 a study showed that 41% of UK workers admitted to using WhatsApp for work purposes, despite it being against the app’s terms of service that prohibit non-personal use.

It has since fallen under the lens of financial regulators. The Securities and Exchange Commission (SEC) has been leading the way – penalising financial services firms for the use of unofficial channels, like WhatsApp, for business communications. They fined 16 banks a total of $1.8 billion at the end of 2022. The Financial Conduct Authority (FCA) has of course felt waves on the other side of the pond and has begun quizzing regulated authorities in the UK.

Morgan Stanley, in the UK, was fined by Ofgem for traders’ use of WhatsApp messages to discuss deals, and the Prudential Regulation Authority (PRA) censured Wyelands Bank for wide-ranging failings including “poor retention of WhatsApp messages”.

This trend not only highlights the critical need for compliance in the financial services but also serves as perhaps a harbinger of impending regulatory scrutiny by the Solicitor Regulatory Authority (SRA). Yet, there is currently a distinct lack of guidance or regulation from the Solicitors Regulatory Authority, firms and lawyers alike find themselves at a crossroads.

The questions posed by the FCA, and fines levied by Ofgem and the PRA, should serve as a warning to law firms and prompt a thorough review of their own communication protocols – perhaps in anticipation of further rule changes.  As Charlie Conchie at City AM wrote, increased pressure from watchdogs has set up a revival for the ‘work phone’ amongst businesses, and law firms should follow suit – failure to record messages is clearly on the regulators’ priority list and a clampdown is imminent.

Beyond incurring fines, there are severe reputational issues that could result from firms being found to have used WhatsApp irresponsibly and law firms in particular must be alive to risks associated with improper use or dissemination of client information. Aside from the potential for sensitive or confidential information being compromised, it also risks misunderstandings and crossing of professional boundaries.

The secondary aspects are twofold: on the one hand, the brevity encouraged by messaging apps may result in improper interactions among colleagues, while on the other it could lead clients to perceive such brevity as an unprofessional departure from exclusive email communication.

Both have negative consequences for the reputation of lawyers within a firm, especially if the content of the messages is leaked and found to be conducive with misconduct.

Reputation is a fragile asset, and as a law firm’s ability to attract top talent, secure new clients and maintain existing client relationships hinges on trust and credibility, lapses in ethical conduct or regulatory compliance could have serious repercussions.  It is therefore imperative for law firms to assess the risks, and be prepared to manage the fallout of, the use of unofficial channels for business purposes.