IM the focus of investigations.

IDC estimates that more than 400 million instant messaging (IM) accounts will be created by 2004, nearly half of them connecting businesses and consumers.

Many businesses are increasingly using the technology--so much so that experts say IM use might overtake use of e-mail in business because IM is faster and is not flooded with spam.

Speaking at ARMA International's 2003 Annual Conference and Expo in Boston, Francis deSouza, CEO of IMLogic, said IM--the fastest-growing communication medium ever--"is a powerful new tool for business communication. It's here to stay and will become bigger." He also noted that business will be the big driver for IM growth in the next few years.

IM technology allows users to communicate in real time between computers without a record of the conversation. The messages can be captured only if special software is installed on the organization's computer networks.

While law enforcement and regulatory agencies are beginning to catch up with IM technology, experts fear businesses are not properly retaining instant messages. The Securities and Exchange Commission (SEC) has issued rules pertaining to the use and archiving of e-mail, but it has not issued similar rules for IM. Self-regulatory organizations have taken steps to regulate IM use, however. Last year, the New York Stock Exchange and the National Association of Securities Dealers began requiring that all instant messages exchanged between member firms and their customers be retained for three years, thus treating it like written correspondence and e-mail.

Despite the lack of government regulation, companies must save employee instant messages on their own for liability protection and other purposes. White-collar fraud investigators are increasingly relying on electronic evidence in the form of e-mail and IM, and that means it is critical for corporations to start retaining both.

One of the largest concentrations of IM use is on Wall Street, where instant messages are used to distribute research, negotiate prices, and execute orders. In December 2002, regulators fined five Wall Street firms a total of more than $8 million for failing to preserve e-mail communications. In October 2003, the SEC began requiring public accounting firms to retain all electronic communications associated with company audits. Lawyers are not sure that IM is included in that rule, but while it remains undefined, most are advising corporate clients to save their IM communications just in case.

More recently, state and federal investigations of illegal trading practices in the mutual fund industry have put IM records evidence in the spotlight. Former Bank of America broker Theodore Sihpol, who was charged last September with grand larceny and securities fraud for allegedly executing after-hours mutual fund sales, worked in a unit of the bank that is a large subscriber of IM services.

Bank of America is also among the small but growing contingent of U.S. companies that are archiving instant messages to satisfy stricter regulatory and supervisory requirements, according to Face Time Communications, which sold the bank IM auditing software licenses for each of its 130,000 employees.

The regulatory environment tightened alter government investigators examining Enron found that Wall Street energy traders used cell phones and instant messages to bypass employer surveillance of their desk phones and e-mail. To date, the SEC has cited IM in only two enforcement actions, both involving market manipulations by unscrupulous traders. Even so, experts say investigators have been slow to grasp how widespread IM systems have become in businesses and the extent to which these exchanges of information have replaced routine e-mail communications.

DeSouza identified several key challenges for using IM in the workplace, including IT headaches, legal risks, security vulnerability, and the fact that employees at one organization may be using four or more IM networks. He suggests organizations better manage IM use and protect themselves by

* managing IM to drive business results

* implementing strong security and usage controls

* complying with legal and corporate accountability standards

* delivering an enterprise-class IM solution

Access deSouza's entire presentation at http://expo.arma.org/sessions/presentations/DeSouza_Key.pdf.