The commotion surrounding the salacious e-mails of the equities-research scandal is starting to subside, but that doesn't mean it's safe to forget about them altogether.

In fact, at least one important implication went largely unremarked upon and could have far-reaching effects for the brokerage community. I'm referring to the way the messages summarily convicted their senders in the court of public opinion.

When Eliot Spitzer released the e-mails uncovered during his investigation into equities research practices, he opened a window to a fascinating world of inside baseball. The public, the media and the regulators looked on with voyeuristic delight at the messages, which provided a rare behind-the-scenes glimpse of Wall Street. They were riveting because they confirmed peoples' worst fears about the securities industry conspiring against the average investor: Securities people say one thing in public, but here's how they really think. With the publication of the e-mails, the acts a defendant actually committed — what he or she actually “did” — took a backseat to what he was thinking.

This scares me, and should scare you too.

E-mail on Demand

To work on modern day Wall Street is to be employed in an industry in which all e-mails are archived and subject to reproduction on demand for a vast array of regulators, prosecutors and plaintiffs' counsel. Sure, now that you've read the news stories, you're more careful. However, there's an old lawyer's maxim that applies here: It's rarely what you're doing that gets you in trouble; it's what you've already done.

Think back during the past six years to all those e-mails you received and sent. Are you comfortable with the prospect of someone rummaging through everything you've written? Are you prepared to answer for every occasional sarcastic aside, the off-color remarks, the criticisms you made out of frustration? Unguarded moments are officially a thing of the past, with regard to e-mail. Nothing in a message is personal or private; everything is fair game. Be careful what you think and be even more careful about sending those thoughts in an e-mail.

You even have to be guarded in the personal communications that you make during working hours. Recently, LaBranche & Co., the largest New York Stock Exchange specialist, turned over thousands of e-mails related to an investigation, but the firm balked at turning over some 8,000 it deemed personal and irrelevant. The company offered to permit an independent third party to review the withheld e-mails, but the NYSE refused to compromise. A hearing panel imposed a censure and a $150,000 fine for failure to cooperate with an ongoing investigation. LaBranche was forced to furnish the contested e-mails, though it is filing an appeal.

At What Cost?

In the end, the e-mail disclosures during the Spitzer investigations might have provided a huge victory to defrauded public investors, but they certainly posed a significant defeat to traditional notions of rights to privacy.

Oddly, the smoking guns of today will likely be tomorrow's museum pieces, because many broker/dealers are already preventing their employees from receiving and sending e-mails on the office PC. Consequently, you're likely to find yourself spending more time on the telephone with customers whose e-mails have been blocked. At the very least, your e-mails are likely to be redirected to some far-flung compliance office for review before you receive them.

It's a funny result if you think about it. Since most broker/dealers don't tape record every single call to and from customers, it will actually be safer to say the very same things over the telephone that are unsafe to write in an e-mail.

Only a decade ago, e-mail was the domain of computer geeks and teenagers locked in their bedrooms. Its passage from those days of relative innocence has been abrupt.

It was fun while it lasted.

Writer's BIO:
Bill Singer
is a partner with the law firm of Gusrae, Kaplan & Bruno.