Wall Street & Technology is part of the Informa Tech Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them. Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.


04:15 PM
Connect Directly

E-Discovery Requests Loom Large for Financial Services Firms

As the turmoil on Wall Street continues, a growing tide of litigation -- and e-discovery requests -- could engulf financial firms.

As regulators delve into firms' archives to try to pin down responsibility for the current financial meltdown, experts anticipate that litigation will rise sharply. The FBI already announced that it is investigating Freddie Mac, AIG and Lehman, and it is expected that countless other firms will be asked to produce data to support other investigations.

Vivian Tero, program manager for compliance infrastructure at research firm IDC, says e-discovery already has risen on Wall Street's priority list. "The selling cycle [for e-discovery products and services] has become shorter. The need is immediate -- firms have regulators breathing down their backs," she explains. "Many companies are very worried and concerned, and want systems to respond [to potential e-discovery requests]."

Litigation is on the rise, confirms Rob Brunner, senior managing director in the technology practice at FTI Consulting. "We've already been seeing a lot of class action lawsuits and shareholder lawsuits," he says.

Brunner suggests it is particularly important for firms that are merging or acquiring other companies in the current meltdown to prepare themselves for e-discovery requests. But given the urgency with which mergers and acquisitions are occurring lately, that is a considerable challenge, he acknowledges.

"When Bear Stearns and WaMu were acquired by J. P. Morgan, or Merrill Lynch by Bank of America, each transaction happened within two short weeks. Often that speed means assets have changed hands so rapidly that there may be some residual company that has to produce e-mail for discovery that doesn't yet own the systems to do it," Brunner says. "If I sold part of my operational arm to another entity and I'm facing an [e-discovery] request from an oversight committee, I might not yet own the systems to produce the e-mail."

The key to being prepared for an e-discovery request, according to Brunner, is to make sure companies have access to the information they need to defend themselves even after an acquisition or merger. That means having the ability to collect, analyze and produce the structured and financial data behind business events.

Of course, e-discovery vendors are positioning their products and services to capitalize on the opportunity and are seeing increasing traction in the industry. Financial holding company Raymond James, for example, uses AXS-One's technology for archiving e-mails and instant messages as well as Bloomberg messages, and recently deployed Orchestria's review system, which provides a policy-compliance monitoring tool.

Enabling Smart Search

"It identifies e-mail or communications that might be fraudulent or may have violated internal policies," says Josh Bohlander, senior manager for technology product management at Raymond James. "It's been very helpful in identifying any items that may come out for e-discovery or internal discussion." The technology, he explains, searches for words, phrases, or positive or negative indicators. "It's much smarter than keyword search," he contends.

The key to efficient e-discovery, experts suggest, is automation. Vendors such as Stratify, an Iron Mountain company, even offer technology to organize and structure large volumes of documents without any input from the document creators. According to Ramana Venkata, Iron Mountain SVP and Stratify GM, the technology automatically places the documents in groups based on conceptual similarities.

Melanie Rodier has worked as a print and broadcast journalist for over 10 years, covering business and finance, general news, and film trade news. Prior to joining Wall Street & Technology in April 2007, Melanie lived in Paris, where she worked for the International Herald ... View Full Bio

1 of 2
Register for Wall Street & Technology Newsletters
Stressed Out by Compliance, Reputational Damage & Fines?
Stressed Out by Compliance, Reputational Damage & Fines?
Financial services executives are living in a "regulatory pressure cooker." Here's how executives are preparing for the new compliance requirements.