The UK FCA seems to have backed off from plans to introduce strict guidelines around the use of social media and communication apps such as WhatsApp for bankers in the City of London.

The regulator had previously indicated it could bring in rules that would have stopped bankers from using WhatsApp and other unofficial communication apps for official business purposes.

Last year, it met with a number of firms in the City to deliver a clear message – that they should either comply or face consequences for their staff’s use of unauthorised communication channels. But FCA chief Nikhil Rathi has now said the regulator will not impose a blanket approach and was shifting away from detailed rulemaking. Speaking on Following the Rules podcast, the senior regulator said firms should not expect any new and detailed wholesale rules on the subject from the FCA.

Rathi also referred to “a different relationship” between the regulator and business bosses in the FCA in the future, in a clear indication of a change of tone as well as policy. His remarks come as UK regulators have come under increasing pressure and criticism over what the government has called “unnecessary regulatory bureaucracy that hinders economic growth.”

Data and privacy concerns

The use of off-channel communication apps such as WhatsApp for official or business purposes has caused a stir among UK regulators, communication and privacy experts as well as rights activists.

In November last year, the head of the UK’s data watchdog raised the prospect of spot checks on NHS staff to make sure they were using WhatsApp safely and were not compromising patients’ data safety.

And in December, the Scottish government announced it will ban the use of non-corporate messaging apps such as WhatsApp on official devices used by civil servants and government ministers.

There have also been concerns in the banking and finance sector. NatWest, one of the UK’s largest high street banks, recently banned its 60,000 staff from using unofficial messaging apps for business purposes.

In February last year, Jamie Bell, the FCA’s head of secondary market oversight, told a GRIP event it was more important that people are obliged to work in such a way as to ensure adherence to rules, rather than flaunting these by simply doing what they want.

“Some things are required, and if social media poses an unacceptable risk, don’t use it. We all make compromises to earn money,” he told an audience of senior professionals.

Despite the various warnings, the FCA has so far not taken any serious enforcement action against UK firms over the use of non-corporate or unofficial communication channels by staff.

SEC stance

The UK regulator’s approach is in stark contrast with its US counterpart. The SEC has imposed billions of dollars of fines on firms after probes into the use of WhatsApp and other unofficial communication channels. (We maintain a complete record of those fines, along with with other recordkeeping transgressions that have occurred since September 2020.)

The latest remarks by the FCA boss lead to questions about whether the regulator has given in to government pressure and is making a U-turn on its own proposals.

Not exactly, according to the FCA. Senior bosses have insisted there are still significant issues around the use of social media by City bankers, especially in relation to data privacy, market integrity and so on.

Nikhil Rathi has said the regulator is now “working with firms on a case-by-case basis to understand how they are monitoring these types of activities.”

“We’re particularly concerned to ensure integrity of markets, proper record keeping, so that we have good audit trails and we want to look at significant market events,” he said on the podcast.

But business bosses have criticised the FCA for ignoring its main duty of “prescriptive rulemaking to focus more on eventual outcomes.” It faced similar similar criticism from the government too.

And earlier this month, the FCA boss accepted in a letter to the government that it will “reduce regulatory burden” on businesses, as part of its strategy to implement the government’s growth agenda.