By Victoria McGrane
WASHINGTON--Capitol Hill's biggest Wall Street critic is raising
fresh concerns that large financial firms backing a new
instant-messaging service may use it to circumvent regulatory
scrutiny.
Sen. Elizabeth Warren (D., Mass) on Monday sent letters to six
financial regulators saying she is troubled that the big banks and
other financial firms backing Symphony Communications Services LLC
may use the new tool to skirt regulatory and legal requirements, as
well as escape enforcement action by the Consumer Financial
Protection Bureau and other regulators.
She also pointed to a letter sent last month to Symphony by the
New York Department of Financial Services, which asked the startup
for details of its data retention and deletion capabilities, among
other features. The New York regulator pointed to promotional
materials from the company that touted its "Guaranteed Data
Deletion" and encryption protections.
The concerns raised by Ms. Warren and the New York regulator
center on the ability of regulators and law enforcement personnel
to access the sorts of written communications that aided
investigations into a series of alleged rate-fixing scandals that
have embroiled major financial firms around the world. As Ms.
Warren notes in her letters, in the case of the manipulation of the
London interbank offered rate, or LIBOR, bankers "used chat rooms
and text messages to coordinate their activities, and it was the
trail of such messages that permitted regulators both to discover
and prosecute these financial crimes."
Symphony was launched last October with the backing of 14 of the
world's biggest banks and money managers, including Goldman Sachs
Group Inc., Bank of America Corp., BlackRock Inc. and Citadel LLC.
The firms wanted to find a way to enable employees to trade
messages instantly and securely, as well as provide an alternative
to the messaging system provided by Bloomberg LLP. The Journal
reported last month that Symphony is seeking another round of
funding that could value the firm at as much as $1 billion.
Ms. Warren said language her office discovered on Symphony's
public website raised alarm bells. Her letter says that the site,
accessed in July 2015, claimed for instance to use tools that could
"prevent government spying" and that "Symphony has designed a
specific set of procedures to guarantee that data deletion is
permanent."
A spokesman for Symphony didn't immediately return a call
seeking comment.
Symphony's current website doesn't appear to contain the
language Ms. Warren raises in her letter. Google searches of
several of the phrases yield error messages.
Ms. Warren sent her letter to the CFPB, the Commodity Futures
Trading Commission, the Justice Department, the Federal Deposit
Insurance Corp., the Financial Industry Regulatory Authority and
the Securities and Exchange Commission. She asked the agencies to
brief her staff on Symphony "and how it may impact your ability to
enforce the law" by Sept. 6.
Peter Rudegeair contributed to this article.
Write to Victoria McGrane at victoria.mcgrane@wsj.com
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