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US regulators fine 16 firms $1.8 billion over staff communications on unofficial channels

28/09/2022

American regulators have fined 16 financial firms including Barclays, Goldman Sachs and Citigroup more than $1.8 billion over “widespread and longstanding failures” to track employees’ messages.

A wide-ranging investigation by the US Securities and Exchange Commission (SEC) found “pervasive” communications on unofficial channels, the agency said.

From January 2018 until last September,

  • Bankers and traders were “routinely” exchanging messaging about business matters via apps on personal devices, according to the watchdog.
  • Their employers “did not maintain or preserve the substantial majority of these off-channel communications”, it said, violating federal securities laws.

The brokerages and banks co-operated with the investigation and gathered a sample of communications from employees’ personal devices. These included investment bankers and debt and equity traders.

The regulator announced fines collectively worth more than $1.1 billion. The Commodity Futures Trading Commission (CFTC) separately charged institutions more than $710 million for

  • “failing to maintain, preserve or produce records that were required to be kept”.

Those hit with steep charges included Barclays, Bank of America, Citigroup, Credit Suisse, Deutsche Bank, Goldman, Morgan Stanley and UBS.

In December last year JP Morgan was fined $200 million for failing to keep proper records of unapproved communications.

Gary Gensler, chairman of the SEC, said:

  • “Finance, ultimately, depends on trust. By failing to honour their recordkeeping and books-and-records obligations, the market participants we have charged today have failed to maintain that trust.
  • Since the 1930s, such recordkeeping has been vital to preserve market integrity.
  • “As technology changes, it’s even more important that registrants appropriately conduct their communications about business matters within only official channels, and they must maintain and preserve those communications.
  • As part of our examinations and enforcement work, we will continue to ensure compliance with these laws.”

The CFTC said institutions failed to track employees’ communications over text, WhatsApp and Signal over several years.

  • “Today’s actions — both in terms of the firms involved and the size of the penalties ordered — underscore the importance of recordkeeping requirements: they’re sacrosanct,”

Gurbir S Grewal, director of the SEC’s enforcement division, said:

  • “If there are allegations of wrongdoing or misconduct, we must be able to examine a firm’s books and records to determine what happened.
  • “These 16 firms not only have admitted the facts and acknowledged that their conduct violated these very important requirements, but have also started to implement measures to prevent future violations.
  • “Other broker dealers and asset managers who are subject to similar requirements under the federal securities laws would be well-served to self-report and self-remediate any deficiencies.”

https://www.thetimes.co.uk/article/49bd004c-3eb1-11ed-b24d-96120f17513d?shareToken=ebad0606165b3f5ba464898f9c2a0c32

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