Supervising the Supervisors: Why Approved Channels Still Create Liability

Regulators have devoted significant attention in recent years to the use of “off-channel” communications by broker-dealers and investment advisers. The SEC alone has brought more than 100 settled cases since 2021, with aggregate penalties exceeding $2 billion, largely involving unapproved platforms such as WhatsApp, iMessage, and personal email.

On August 13, 2025, FINRA announced a Letter of Acceptance, Waiver, and Consent (AWC) that extends this focus in an important way. Unlike prior matters, the case did not involve the use of unauthorized applications. Instead, FINRA sanctioned a firm for failing to reasonably supervise an approved instant-messaging platform. The settlement underscores that approval of a system does not absolve firms of supervisory responsibility.

The Enforcement Action

Beginning in January 2020, the firm permitted employees to use a vendor-provided messaging application that was intended to capture, archive, and make communications available for supervisory review. FINRA found, however, that the firm:

• Did not verify that employees’ devices were properly connected to the archiving service;

• Did not verify that employees’ communications were consistently being captured; and

• Did not describe in its written supervisory procedures (WSPs) how supervisors should confirm that the system was functioning.

As a result, some business-related messages were never preserved, and the firm was unable to produce all communications responsive to a FINRA inquiry. FINRA imposed a $100,000 fine. The firm has since adopted a different platform that integrates capture and review.

Key Observations

This matter provides several compliance lessons:

1. Approval Does Not Confer Immunity
   Permitting a platform is not sufficient; firms must ensure it functions as intended.

2. Supervision Must Be Ongoing
   Regulators expect continuous verification that communications are preserved and reviewable.

3. Vendor Reliance Is Not a Defense
   Outsourcing archiving to a third-party provider does not transfer supervisory responsibility.

4. Written Procedures Are Critical
   WSPs should clearly articulate how supervisors confirm system performance.

5. Remediation May Mitigate Sanctions
   FINRA noted the firm’s subsequent adoption of a more robust platform, suggesting that proactive remediation can influence settlement outcomes.

Broader Context

This AWC reflects an evolution in regulatory priorities. While the SEC’s enforcement surge has targeted unauthorized off-channel communications, FINRA’s action makes clear that approved systems remain an area of risk if firms do not adequately supervise them.

The case reinforces that “set it and forget it” approaches are untenable. Firms that authorize digital communication platforms must implement and document supervisory processes to ensure compliance with recordkeeping obligations.

Conclusion

FINRA will scrutinize not only whether firms prohibit unapproved platforms, but also whether they effectively supervise the use of approved ones. Broker-dealers and advisers should review their policies, supervisory procedures, and testing practices to confirm that communications are being captured, archived, and reviewed as required.

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