Wall Street banks including Bank of America and Goldman Sachs fined $1.8 billion over failures in monitoring how staff used personal phones to talk about work
Grace Dean
Wed, September 28, 2022
A Bank of America storefront.
Wall Street banks have been fined for not monitoring how staff use their phones to talk about work.
The offences involved employees ranging from senior executives to debt and equity traders.
The SEC issued $1.1 billion in fines while the CFTC issued $710 million, both on Wednesday.
Several Wall Street banks have been fined a combined $1.1 billion by the US Securities and Exchange Commission and $710 million by the Commodity Futures Trading Commission for not monitoring or keeping records about how staff use their personal phones to message about work.
The SEC fines were imposed on 10 large broker-dealers, five of their affiliates, and one affiliated investment adviser, including Bank of America, Citigroup Global Markets, Credit Suisse Securities, Deutsche Bank Securities, Barclays Capital, Goldman Sachs, Morgan Stanley, and UBS Securities.
The SEC said Wednesday that the fines covered "widespread and longstanding failures by the firms and their employees to maintain and preserve electronic communications."
It said that between January 2018 and September 2021, employees "routinely" used personal devices to communicate about business matters. The firms violated federal securities laws by failing to preserve the vast majority of these communications, the SEC said.
The offences involved employees ranging from supervisors and senior executives to junior investment bankers and debt and equity traders.
The SEC said it had requested information about off-channel communications from around 30 senior broker-dealer personnel at Goldman Sachs and found that every one of them had taken part in "at least some level" of off-channel communications.
This included one senior investment banker who had sent and received "tens of thousands" of off-channel text messages, concerning things including investment strategy and client meetings, the SEC said.
It added that the firms cooperated with the investigation and admitted to their wrongdoing. The companies have agreed to pay penalties ranging from $10 million to $125 million each.
They also agreed to have compliance consultants review their policies relating to keeping records of electronic communications found on personal devices.
The CFTC also announced settlements with the firms for related conduct on Wednesday.
The regulator said its investigation found that the companies had failed to stop their employees, including those at senior levels, "from communicating both internally and externally using unapproved communication methods," including text, WhatsApp, and Signal messages.
Each company had failed to retain "hundreds if not thousands of business-related communications," including some connected to their commodities and swaps businesses, the CFTC said.
It said that each firm acknowledged that they were aware of their employees' "widespread and longstanding use" of unapproved methods for business-related communications.
"We fully cooperated with our regulators on this industry-wide matter," a Deutsche Bank spokesperson told Insider. "We have proactively deployed fully compliant and convenient text and chat platforms and will continue to scale these technologies to meet the expectations of our regulators and our clients."
Credit Suisse and Barclays declined to comment on the investigations and the settlements. The other companies mentioned in this article did not immediately respond to Insider's request for comment.
A Citi spokesperson told The New York Times that officials at the bank were pleased to put the matter to rest.
Grace Dean
Wed, September 28, 2022
A Bank of America storefront.
Wall Street banks have been fined for not monitoring how staff use their phones to talk about work.
The offences involved employees ranging from senior executives to debt and equity traders.
The SEC issued $1.1 billion in fines while the CFTC issued $710 million, both on Wednesday.
Several Wall Street banks have been fined a combined $1.1 billion by the US Securities and Exchange Commission and $710 million by the Commodity Futures Trading Commission for not monitoring or keeping records about how staff use their personal phones to message about work.
The SEC fines were imposed on 10 large broker-dealers, five of their affiliates, and one affiliated investment adviser, including Bank of America, Citigroup Global Markets, Credit Suisse Securities, Deutsche Bank Securities, Barclays Capital, Goldman Sachs, Morgan Stanley, and UBS Securities.
The SEC said Wednesday that the fines covered "widespread and longstanding failures by the firms and their employees to maintain and preserve electronic communications."
It said that between January 2018 and September 2021, employees "routinely" used personal devices to communicate about business matters. The firms violated federal securities laws by failing to preserve the vast majority of these communications, the SEC said.
The offences involved employees ranging from supervisors and senior executives to junior investment bankers and debt and equity traders.
The SEC said it had requested information about off-channel communications from around 30 senior broker-dealer personnel at Goldman Sachs and found that every one of them had taken part in "at least some level" of off-channel communications.
This included one senior investment banker who had sent and received "tens of thousands" of off-channel text messages, concerning things including investment strategy and client meetings, the SEC said.
It added that the firms cooperated with the investigation and admitted to their wrongdoing. The companies have agreed to pay penalties ranging from $10 million to $125 million each.
They also agreed to have compliance consultants review their policies relating to keeping records of electronic communications found on personal devices.
The CFTC also announced settlements with the firms for related conduct on Wednesday.
The regulator said its investigation found that the companies had failed to stop their employees, including those at senior levels, "from communicating both internally and externally using unapproved communication methods," including text, WhatsApp, and Signal messages.
Each company had failed to retain "hundreds if not thousands of business-related communications," including some connected to their commodities and swaps businesses, the CFTC said.
It said that each firm acknowledged that they were aware of their employees' "widespread and longstanding use" of unapproved methods for business-related communications.
"We fully cooperated with our regulators on this industry-wide matter," a Deutsche Bank spokesperson told Insider. "We have proactively deployed fully compliant and convenient text and chat platforms and will continue to scale these technologies to meet the expectations of our regulators and our clients."
Credit Suisse and Barclays declined to comment on the investigations and the settlements. The other companies mentioned in this article did not immediately respond to Insider's request for comment.
A Citi spokesperson told The New York Times that officials at the bank were pleased to put the matter to rest.
SEC, CFTC Fine Wall Street Banks for Record-Keeping Failures
Swayta Shah
Wed, September 28, 2022 at 7:34 AM·2 min read
The U.S. regulators – Securities and Exchange Commission (“SEC”) and the Commodity Futures Trading Commission (“CFTC”) – have penalized several major Wall Street banks over “widespread and longstanding failures” to maintain and preserve records of electronic communications between traders and their clients.
Some of the big names are Barclays BCS, Bank of America BAC, Citigroup, Credit Suisse, Goldman Sachs GS, Morgan Stanley MS and UBS Group AG. The firms (in aggregate) will be paying more than $1.8 billion to the SEC and the CFTC combined to resolve the matter.
Among the Wall Street banks, Bank of America is facing the largest fine of $225 million, while others, including BCS, MS and GS, will be paying $200 million each. The BAC’s penalty dwarfs the prior fines for similar allegations. In December 2021, JPMorgan JPM agreed to pay $200 million penalty for its failure to monitor business-related communications on platforms like WhatsApp. Of the total amount to be paid by JPM, $125 million will go to the SEC and $75 million to the CFTC.
Case Backdrop
The industry-wide investigations conducted by the SEC and the CFTC laid bare “pervasive off-channel communications” from the personal electronic devices between banks’ personnel and their clients between January 2018 and September 2021. Also, these “off-channel communications” were not maintained or preserved in clear violation of the federal securities provisions.
The firms need to retain “certain of these written communications because they related to the firms’ businesses.” By not following these regulations, the regulators’ capability to supervise financial markets, guarantee compliance with vital rules, “and gather evidence in other, unrelated investigations” was hampered.
While Wall Street has always struggled not to communicate about business matters using text messages and WhatsApp on their personal devices, the problem became more severe during the pandemic as employees worked from home. The bank employees, including “senior and junior investment bankers and debt and equity traders,” were found to be violating the securities laws.
Conclusion
The SEC chairman, Gary Gensler, said, “Finance, ultimately, depends on trust. By failing to honor their recordkeeping and books-and-records obligations, the market participants we have charged today have failed to maintain that trust.”
The Wall Street banks admitted to the facts in their respective settlement orders with the regulators. However, BAC and a Japan-based investment bank neither admitted nor denied certain findings of the CFTC. The companies have also started “implementing improvements to their compliance policies and procedures to settle these matters.”
Swayta Shah
Wed, September 28, 2022 at 7:34 AM·2 min read
The U.S. regulators – Securities and Exchange Commission (“SEC”) and the Commodity Futures Trading Commission (“CFTC”) – have penalized several major Wall Street banks over “widespread and longstanding failures” to maintain and preserve records of electronic communications between traders and their clients.
Some of the big names are Barclays BCS, Bank of America BAC, Citigroup, Credit Suisse, Goldman Sachs GS, Morgan Stanley MS and UBS Group AG. The firms (in aggregate) will be paying more than $1.8 billion to the SEC and the CFTC combined to resolve the matter.
Among the Wall Street banks, Bank of America is facing the largest fine of $225 million, while others, including BCS, MS and GS, will be paying $200 million each. The BAC’s penalty dwarfs the prior fines for similar allegations. In December 2021, JPMorgan JPM agreed to pay $200 million penalty for its failure to monitor business-related communications on platforms like WhatsApp. Of the total amount to be paid by JPM, $125 million will go to the SEC and $75 million to the CFTC.
Case Backdrop
The industry-wide investigations conducted by the SEC and the CFTC laid bare “pervasive off-channel communications” from the personal electronic devices between banks’ personnel and their clients between January 2018 and September 2021. Also, these “off-channel communications” were not maintained or preserved in clear violation of the federal securities provisions.
The firms need to retain “certain of these written communications because they related to the firms’ businesses.” By not following these regulations, the regulators’ capability to supervise financial markets, guarantee compliance with vital rules, “and gather evidence in other, unrelated investigations” was hampered.
While Wall Street has always struggled not to communicate about business matters using text messages and WhatsApp on their personal devices, the problem became more severe during the pandemic as employees worked from home. The bank employees, including “senior and junior investment bankers and debt and equity traders,” were found to be violating the securities laws.
Conclusion
The SEC chairman, Gary Gensler, said, “Finance, ultimately, depends on trust. By failing to honor their recordkeeping and books-and-records obligations, the market participants we have charged today have failed to maintain that trust.”
The Wall Street banks admitted to the facts in their respective settlement orders with the regulators. However, BAC and a Japan-based investment bank neither admitted nor denied certain findings of the CFTC. The companies have also started “implementing improvements to their compliance policies and procedures to settle these matters.”
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