US regulators on Tuesday fined 16 financial firms, including Barclays, Bank of America, Citigroup, Credit Suisse, Goldman Sachs, Morgan Stanley and UBS, a total of $1.8 billion after staff spoke out about deals and trades on your personal devices and messaging apps.
The wide-ranging industry investigation, first reported by Reuters last year and later revealed by multiple lenders, is a landmark case for the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). , marking one of their biggest collective resolutions.
From January 2018 to September 2021, bank staff routinely communicated about business matters, such as debt and equity deals, with peers, clients and other outside advisors using applications from their personal devices, such as text messaging and WhatsApp, the agencies said.
The institutions did not retain most of those personal chats, violating federal rules that require broker-dealers and other financial institutions to retain business communications. That impeded the agencies' ability to monitor financial markets, ensure compliance with key rules and collect evidence in other unrelated investigations, the agencies said.
Spokesmen for UBS, Morgan Stanley and Citi said the banks were pleased to have resolved the matter. Bank of America, Barclays, Goldman Sachs, Nomura and Credit Suisse declined to comment. "Today's actions, both in terms of the companies involved and the size of the sanctions ordered, underscore the importance of record-keeping requirements: they are sacrosanct. If there are allegations of wrongdoing or misconduct, we must be able to examine the books of record. a company and records," said Gurbir Grewal, director of the SEC's Division of Enforcement.
The illegalities occurred at as many as 16 companies and involved employees at multiple levels, including investment bankers and senior and junior traders, the SEC said.
In a major victory for the agencies, the institutions admitted the facts and acknowledged that they violated federal laws. However, Bank of America and Nomura did not come to declare anything about the investigation that uncovered the illegalities.
The institutions, which cooperated with the investigation, have begun to implement improvements to their compliance policies and procedures, the SEC said.
Wall Street banks have fought for years to end the use of personal devices at work, often banning them outright, but the problem became more acute when bankers and merchants worked from home during the pandemic.
According to CFTC Commissioner Christy Goldsmith Romero, staff used personal apps to evade supervision, sometimes at the direction of senior executives who knew they were violating bank policies but wanted to obfuscate business communications.
In one example cited by his office, Bank of America staff used WhatsApp, with one salesperson writing, "We use WhatsApp all the time, but we regularly delete conversations." One trading desk boss encouraged traders to delete messages on personal devices and use Signal, even during the CFTC investigation.
In another example, a Nomura trader deleted messages, which included incriminating statements about trading, after the CFTC sent a request to preserve documents, his office said. "Those who choose to participate in the US financial markets are warned: the era of evasive communication practices is over," Goldsmith Romero said in a statement.
