Sen. Warren Raises Concerns About Banks' Messaging Startup -- Update

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."

"Symphony is designed to meet the cyber-security and compliance needs of financial firms. The use of Symphony does not change regulators' ability to obtain messages from our clients. Symphony delivers messages to its clients to download, decrypt, and archive, and they are able to provide those messages to regulators just as they would with other compliant messaging systems.

Symphony is innovative because of its "end-to-end" security capability that protects communications from cyber-threats and the risk of a data breach--while safeguarding our customers' ability to retain records of their messages."

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.

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