Instant Messaging: Smooth Operator Or Legal Burden?

If you still view instant messaging (IM) as a novel technology geared toward the kid next door or that nerdy intern down the hall, you may want to consider the following:

Sky Capital Holdings Ltd., a 150-employee Wall Street brokerage and retail trading company, has essentially locked down its IT system to prevent all but a dozen or so securities traders from using IM. Like other financial institutions using IM, the company must comply with strict regulatory measures instituted by the National Association of Securities Dealers, as well as the SEC, NYSE and the Nasdaq.

Potential problems arise when employees send messages--with attachments--without a company's oversight and control. Further, without company supervision, it's up to the individual user to activate the software's optional archive function.

Recent surveys only add to the concern. For example, the 2004 ePolicy/American Management Association poll of 840 U.S. businesses found that only 11 percent use software to monitor IMs even though 58 percent of their workers use IM at the office. Under regulations adopted by the NASD in 2003, financial companies that allow IM use must monitor and retain all electronic communications--including e-mails and IMs--for three years. As a result, companies such as Sky Capital severely restrict its use in the workplace.

While unregulated companies still can argue IMs are transient or ephemeral, Daley points out that the Federal Civil Rules Advisory Committee's proposed change to Rule 34 expands the definition of "document" to include all "electronically stored information."

"The trend is that there is less and less distinction between e-mail and IM when it comes to a company's record-retention policy and litigation-hold notices," Daley says. "If employees are using IM for business purposes, the first time litigation ensues and IM is part of the investigation or subpoena, the event will trump the company's normal retention policy (and the IMs will have to be logged)."

staff Writer

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