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IM Gets Regulated

Storage vendors are ROFL as NASD rules that financial institutions must archive instant messages

They're ephemeral and fleeting, but new regulations have just made instant messages a lot more permanent: The National Association of Securities Dealers Inc. (NASD) announced yesterday that financial services companies not only have to store emails, but also all IM correspondence for at least three years (see NASD Rules on IM).

The ruling, which follows similar guidelines posted on the New York Stock Exchange Inc. (NYSE) Website in March, represents a new interpretation of the 1997 Securities and Exchange Commission (SEC) Act Rule 17a-4, which requires all financial institutions to archive electronic records as they would paper records.

While the new rules are bound to cause headaches for financial institutions, which have been struggling through the past year of regulatory crackdowns to get their email compliant, analysts say it offers a huge opportunity for data storage and archiving companies.

"Definitely, this will expand their business," says The Radicati Group Inc. analyst Masha Khmargseva. "At this point, there are regulations that say these companies have to archive all electronic communications, but since it doesnt specify IM, a lot of them haven’t done it [for IM]."

According to Merrill Lynch & Co. Inc. analyst John Roy, financial institutions currently represent about 25 percent of all IT spending. "It will have a significant impact," he says. He adds, however, that since IM for the time being mostly consists of plain text, it will create less of a demand for additional storage than rules for archiving email have.

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