Slack Is Getting Ready for Wall Street. But Is Wall Street Ready for Slack?
Imagine there’s another financial scandal and digital communications between co-workers once again become courtroom evidence. In the era of office chatroom services such as Slack and Hipchat, the evidence will read a little differently than the usual e-mails. A running group chat that concerns federal prosecutors will almost inevitably be interlaced with links to a random click-bait quiz—Do you belong in NY or SF?—followed by scattered arguments between colleagues about the relative merits of bagels and burritos. Try to imagine stern attorneys puzzling over transcripts that descend into a stream of sarcastic animations made by Slack’s built-in GIF generator. Will the judge be ready rule about chatroom memes?
At Robinhood, a startup that makes a stock-trading app and is a registered broker dealer, carefully preserving dumb GIFs is the law. Unlike the typical Slack client from the freer-wheeling precincts of tech and online media, Robinhood, in Palo Alto, Calif., is subject to stringent financial industry regulations. Compliance means that all digital communications among employees—including office humor from within Robinhood’s Slack chatrooms—must be recorded, archived, and available for parsing by the Financial Industry Regulatory Authority or the U.S. Securities and Exchange Commission.
Until recently, Slack made it almost impossible for financial companies to use its products. After raising $340 million to give the year-old company a $2.8 billion valuation, Slack is now attempting to fill a big, potentially lucrative hole in the marketplace. “If you’re making a communications product and look at a landscape of companies that want to use your product, finance is a huge sector,” says Anne Toth, an executive who joined Slack in October to head up policy and compliance strategy.
As of April, Slack counted about 200,000 paid subscribers among its 750,000 daily active users. The company is clearly betting finance-related companies will be willing to join the paying ranks. “There were a number of companies in our pipeline that said, ‘We won’t be able to use you unless you meet this compliance obligation,’ ” says Toth. The potential revenue from finance companies is huge. The not-yet-available enterprise plan, which will include what Slack describes as “organization-wide security, data retention and compliance policies,” will cost between $40 and $48 per user—more than three times as much as Slack currently charges for its most expensive plan.
Robinhood is among the first financial businesses to use Slack. Otherwise, Robinhood’s staff uses the chatroom service as most offices do: a lot. “It’s definitely the main way to communicate here,” says Jack Randall, the company’s director of communications. More than two dozen employees spend their working days hanging out in various channels—some of them private, some open to everyone, and all of them recorded for legal posterity. “We probably have too much fun on Slack,” Randall concedes.
Fun is something of a risk. Slack might create too relaxed a chatting environment for the finance industry. Employees in chatrooms “are a lot less formal and more colloquial,” says Lindsay Simon, founder of Simon Compliance, a consultancy. “You are trained and ingrained in the financial services industry. Don’t write anything in an e-mail that you don’t want to be on the cover of the Wall Street Journal. People feel more free to chat.”
Even after the e-mails from the Enron scandal exposed embarrassing behaviors ranging from office gossip to illegal behavior, people continue to write dumb things in their digital communications—and chat hasn’t made it any better. Traders in the Libor scandal joked over chat about being “like a whores drawers” while rigging rates. Some employers try to minimizing risk by restraining digital language. One e-mail from a Goldman Sachs employee, read aloud during 2010 Senate hearings, described a “shitty deal” an executive knew he was giving to clients. Goldman has since banned profane language.
Considering the famously casual and free-flowing nature of Slack conversations, it’s not hard to imagine some entertaining, if not shocking, future court transcripts. Does that worry Robinhood’s executives? “It actually does sometimes,” says Chief Operating Officer Nathan Rodland, who is also part of the compliance team.
Companies registered with Finra and the SEC are required to archive and track all electronic communications, including e-mail, social-media updates, and group chat platforms. Until Toth came on board, obeying what’s known as Rule 17a-4 would have been quite difficult for Slack clients. “They need to be able to store all of our communications, even communications that would be considered private,” Toth says. Slack’s compliance product will capture private group chats as well as edited and deleted messages—conversations it had, until earlier this year, not retained. “That was not a small undertaking.”
Slack’s compliance exports, available under the Plus plans for an additional charge of $12.50 to $15 per user, brings the platform one step closer to usable for regulated companies. The tool allows employers to record and export all Slack chats into a big data file. Less than 1 percent of Slack’s customers use compliance exports right now. Robinhood, for example, doesn’t pay for compliance exports; instead, an in-house engineer created a workaround that archives all conversations and ports them into Smarsh, a digital-archiving tool that can also be used for compliance.
Following federal regulations goes beyond recording and archiving. Employers are also obligated to undertake surveillance, scanning all digital communications for potential red flags. “Compliance officers create a set of filters,” explains David Gurle, the chief executive of Symphony, a Slack competitor aimed at such regulated industries as finance and health care. Trigger the keyword in a chatroom, for example, and a warning might pop up. Symphony, which was launched in beta in April, also offers additional privacy and regulatory features and has already drawn about 50,000 active users.
Slack does not offer anything like Symphony’s active surveillance feature at present. An executive at Smarsh, Sam Kolbert-Hyle, says his company is working on integration with Slack, and Slack’s Toth acknowledges conversations with various archival companies, including Smarsh. (Bloomberg LP also provides digital communications and archiving tools to financial institutions.)
For compliance officers, the benefits of transparency might outweigh the potential for embarrassing or incriminating conversations. Unlike e-mail or private instant messengers, most Slack conversations are visible to everyone in your workplace. “It helps me and my team establish patterns and trends of what’s going on,” says Scott Friedman, the compliance officer at Robinhood. “If I see someone going off path, I can push them—or, as I call it, nudge them—in the right direction.” If the joking gets out of hand, Rodland will tell people to get back to work. “If it were just happening around the water cooler, if it were scuttlebutt, I might not be able to see it,” he says. “This allows me to say, ‘Oh interesting, do I need to step in here?’ ”
With its compliance efforts, Slack has attempted to make the constant recording of conversations overt. Employees have access to team message-retention settings so they can see what’s being recorded. If a team enables compliance, a Slack bot will pop up with a message saying so. The header at the top of the channel will also say if compliance export is activated. “It’s a little bit like your water-cooler conversations,” Toth says. “The conversation might be a little different if our boss is standing there with us, than if she’s not. That’s the expectation that we wanted to set with people. In fact, your boss could be standing there, which is the way it works in all other business communications today.”
Of course, people eventually grow numb to disclaimers and warnings. Many office workers sign away their rights to e-mail privacy at work yet continue to have inappropriate conversations over company servers. Even with all of Slack’s attempts to remind people their conversations are recorded, it is just a matter of time until a Slack transcript shows up in court. But that’s kind of the point: “It’s supposed to be unobtrusive,” says Smarsh’s Kolbert-Hyle. “You don’t want the employees to know. What if they’re involved in the lawsuit?”
Whatever the risks of group chatrooms, compliance issues aren’t likely to keep staid financial companies from eventually demanding group chat tools that suit their needs. Younger workers reared on social media will come to think of joking around with GIFs as just another standard perk of life in a hip workplace, like flexible hours or office happy hours. If banks want to attract the best talent, they will have to adapt. “We want to use these cool new, hip, trendy startups, their services and products,” admits Robinhood’s Randall. “And they can’t support our regulatory requirements.”