U.S. Securities and Exchange Commission (SEC) Chairman Gary Gensler, testifies before the Senate Banking, Housing and Urban Affairs Committee during a
U.S. Securities and Exchange Commission (SEC) Chairman Gary Gensler, testifies before the Senate Banking, Housing and Urban Affairs Committee during an oversight hearing on Capitol Hill in Washington, September 15, 2022.
Evelyn Hockstein | Reuters
U.S. regulators on Tuesday announced a combined $549 million in penalties against Wells Fargo and a raft of smaller or non-U.S. firms that failed to maintain electronic records of employee communications.
The Securities and Exchange Commission disclosed charges and $289 million in fines against 11 firms for “widespread and longstanding failures” in record-keeping, while the Commodity Futures Trading Commission also said it fined four banks a total of $260 million for failing to maintain records required by the agency.
It was regulators’ latest effort to stamp out the pervasive use of secure messaging apps like Signal, WhatsApp or Apple‘s iMessage by Wall Street employees and managers. Starting in late 2021, the watchdogs secured settlements with bigger players including JPMorgan Chase, Goldman Sachs, Morgan Stanley and Citigroup. Fines related to the issue total more than $2 billion, according to the SEC and CFTC.
The firms admitted that from at least 2019, employees used side channels like WhatsApp to discuss company business and failed to preserve records “in violation of federal securities laws,” the SEC said Tuesday.
Wells Fargo, the fourth biggest U.S. bank by assets and a relatively small player on Wall Street, racked up the most fines on Tuesday, with a total of $200 million in penalties.
French banks BNP Paribas and Societe Generale were fined $110 million each, while the Bank of Montreal was fined $60 million. The SEC also fined Japanese firms Mizuho Securities and SMBC Nikko Securities and boutique U.S. investment banks including Houlihan Lokey, Moelis and Wedbush Securities.
On Wall Street, company records of emails and other communications via official channels are often automatically generated to adhere to requirements that clients are treated fairly. But after some of the industry’s biggest scandals of the past decade hinged on incriminating messages preserved in chatrooms, workers often leaned on side channels to conduct business.
In recent years, firms including JPMorgan and Deutsche Bank have fired or put on leave traders for leaning on the practice.
Encrypted messages on third-party platforms like Signal make it impossible for banks to record and retain logs of interactions. Even the managers responsible for enforcing the rules were guilty of the practice, regulators said Tuesday.
This story is developing. Please check back for updates.
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