Barclay’s Incident: With E-Discovery, Technology Cuts Both Ways

January 10, 2014

BarclaysTechnology is sometimes thought to have the ability to make everything easier, quicker and cheaper.  Reality, of course, presents a far more complex picture.

What brings this to mind was the little-noticed Dec. 29, 2013, announcement that Barclays Capital would pay $3.75 million in fines to settle a suit brought by the Financial Industry Regulatory Authority.

Banks must keep their records in a “non-rewritable, non-erasable format” so that investigators can track larger-picture actions, if need be. FINRA assessed the fine because it found that the London-based  Barclays “failed to preserve electronic records, emails and instant messages for the required minimum time of 10 years.”

Per the terms of the settlement, Barclays neither admits nor denies FINRA’s allegations.

News of the settlement did not make waves, first because it came during the bustle of the holidays and, second, because a $3.75 million fine is not much for an international bank to pay.

It is surprising, though, that a large, sophisticated organization apparently failed to satisfy a ground-level compliance demand. In fact, this situation illustrates some of the challenges facing the e-discovery field.

The business community’s transition from paper files and records to electronically stored information was supposed to make discovery faster, more comprehensive and less costly. Some of those advantages may have been realized, but certainly not all of them.

If a multinational bank can “fail to preserve” emails and instant messages — without a doubt, material that would be called upon in a lawsuit — then one has to wonder what challenges smaller organizations face when it comes to preserving electronic communications.

Now, the administration of justice has long depended on the transparency that the discovery phase of a lawsuit provides. If transitioning to electronic records has been worse, not better, for legally required transparency, then our justice system is hampered – but notice we said “if.” What has your experience been? Has e-discovery been a helpful development for your practice, or functioned more as its own, unique obstacle?