To many, “e-discovery” still sounds like an internet start-up, although the term - short for “electronic discovery” - is rapidly becoming commonplace, especially in the finance world, where rogue traders and rumour mongers are prompting more focus on e-surveillance and a company’s ability to find the right electronic documents to respond to a lawsuit.
In the wake of scandals such as Jerome Kerviel’s alleged rogue trading at Societe Generale, or the aggressive rumour-mill that undermined banks including HBOS and Bear Stearns, banks are now eyeing an emerging new range of “spy software” that can even monitor instant messaging dialogue, utilising powerful computers that can read emails, listen to telephone conversations and analyse chat conversations as participants type, reports Reuters.
The software that enables the recording and monitoring of employee activity can help companies collect huge amounts of internal information - which they may increasingly need in the face of lawsuits spawned by the subprime crisis, or to meet rising regulatory demands, the report adds.
The growing push among banks to acquire new and powerful surveillance software has accelerated since key changes last December to US laws affecting the use of electronic evidence. As the FT noted at the time, the changes demand a “new mindset” from companies and their lawyers.
One of the most controversial and confusing aspects of the new rules relate to preservation of electronic information, notes the FT: can companies recycle the tapes used to back up information on corporate servers, or do they need to keep all the back-up tapes, just in case? And at what point do they need to start saving information: when they get sued or as soon as they think they might get sued?
Financial firms clearly need advice on such questions - as well as on the actual technology. Hence, we’re witnessing the growth of an increasingly lucrative industry devoted to developing new and ever more ingenious ways to monitor employees and financial transactions. Reuters cites forecasts by IT consultants Gartner that the e-discovery software segment will generate $760.5m in revenues this year, up from $524.5m in 2007.
Accordingly, competition is intensifying, and in one display of counter-intuitive creativity, French IT consulting and software company LCA hired Kerviel in late April - after he gained provisional release from prison pending trial.
Although LCA has not elaborated on his precise role, Kerviel is presumably the resident poacher-turned-gamekeeper, helping develop systems to net rogue traders. LCA angrily rejected the suggestion that the hiring of Kerviel was a publicity stunt, reported Forbes.com. Indeed, if Kerviel’s presence doesn’t rile LCA’s heavy-hitting client list, which has included Axa and SocGen arch-rival BNP Paribas, it could prove a master stroke.
