Financial Services Firm Turns to Email Archiving Service

Cowen and Co. LLC, an investment banking firm, works in a heavily regulated industry. Consequently, it was ahead of the curve in buying an email archiving system, deploying server-based technology at the turn of the millennium. As limitations with that system became apparent, the company once again moved to the head of the pack and migrated to a hosted email archiving system.

In business for close to 90 years, Cowen and Co. focuses on investment banking services, equity trading, and equity research. The firm has about 600 employees with headquarters in New York City and offices in Atlanta, Boston, Chicago, and San Francisco. Internationally, the firm operates in London and Geneva and recently acquired a bank in Shanghai.

Recognizing that it had to monitor the flow of its email, the investment banking firm installed an archiving system from Zantaz Inc. in about 2001. The system operated well for a while, but Cowen and Co. realized it had limits about three years ago. The financial services company needed message verification -- it had to be sure that every item that came into or out of the firm was acknowledged and properly stored. "On a couple of occasions, we had to self-disclose to regulators that messages had not been properly logged," says Thomas Fread, director of compliance technology at Cowen and Co.

The unflagged items were not important correspondences, so there was no harm to the company's reputation or finances. However, the potential for significant damage was evident and becoming more likely as time passed. The financial services firm, which uses Microsoft Corp. (Nasdaq: MSFT) Outlook, was seeing email volume growing by about 1 Tbyte per year as users' reliance on electronic messaging increased.

After identifying the shortcoming, the financial services company tried to work with the vendor to improve the system. At that time, new regulations -- and therefore additional system requirements -- were emerging. The Financial Industry Regulatory Authority mandated that financial institutions develop review models that identified risky correspondences. "Our research analysts cannot correspond to our investment banking group," Fread says. If that information barrier was cracked, it could cause the firm significant damage. Consequently, the financial services firm needed a system that would identify and block inappropriate communications among different corporate groups.As the limitations with the Zantaz system became clear in early 2006, Cowen and Co. began to search for a possible replacement. (Zantax was acquired by Autonomy Corp. in 2007.) The company evaluated about a dozen different products and eventually narrowed its list to three suppliers: FrontBridge Technologies Inc. , Global Relay, and Fortiva Inc.

In June of 2006, the financial services corporation opted for Fortiva. "The service enabled us to supervise communication to and from different groups by applying specific sampling and lexicon rules," Fread says. This feature seemed flexible, offered granular control, and was intuitive, so the company could deploy new rules quickly.

Another plus was Fortiva's integration with Microsoft Active Directory. The system recognizes a job title, such as analyst, and automatically applies the appropriate rules to an employees correspondences. Because there is no manual intervention required, this feature represented savings in time and effort for the IT department.

A third differentiating factor was that the system was able to work with multiple electronic sources. In addition to email, the financial services company could monitor instant messaging and proprietary information channels, such as Bloomberg, Reuters, and UBSChat.

Last, Fortiva was one of the early entrants into the software-as-a-service (SaaS) arena, which appealed to Cowen and Co. The service required a small footprint -- basically setting up an appliance next to the mail server -- and that setup meshed with the financial services company's desire to maintain a small data center that could be run by a small staff.However, many firms are leery of handing their archiving systems to a third party -- they fear a loss of control. "Fortiva was SAS 70 compliant, which was sufficient for us," Fread says. SAS 70 defines the standards used by an auditor to assess the internal controls of a service organization.

The installation went smoothly, and the system has been operating since the fall of 2006. However, an important change occurred: Fortiva was purchased by Proofpoint Inc. last June. "To date, there have not been any changes in our interactions with the service and support staff," said Fread.

Yet, there could be some changes coming with the pricing of its service. Because Cowen and Co. was an early customer, it received an "All You Could Eat" service pricing model, so it did not matter how much email employees generated. Now, that SaaS archiving services have become more widely accepted, that model is expected to change to one based on how much email a company stores. Because they are in the middle of negotiations, Fread did not want to disclose what they are paying or how much of an increase he expects.

Cowen and Co. was an early user of email archiving solutions and has learned some valuable lessons. While the company found that its first product did not meet its long-term needs, it feels good about its future with the SaaS system.