Regulators said Tuesday that eleven of the world’s largest banks and brokerages will collectively pay $1.8 billion in fines to resolve regulatory investigations into their employees’ use of messaging apps that violated record-keeping rules.
The fines, which many banks have already disclosed to shareholders, confirm the market regulators’ tough approach to civil enforcement. The $200 million in fines, which many banks will pay under the agreements, have only been seen in fraud cases or investigations that allegedly harm investors.
But the Securities and Exchange Commission, in particular, has lobbied during the Biden administration for higher fines than precedent, saying it wants to impose fines that punish violations and effectively deter potential future harm. The SEC’s focus on record keeping will likely extend to the side of money managers, who also have to maintain written communications regarding investment advice.
Last month, the Securities and Exchange Commission alleged that hedge fund manager Deccan Value Investors LP and its chief investment officer failed to keep messages posted.
iMessage and WhatsApp. The Securities and Exchange Commission said that in some cases, the chief investment officer directed a company officer to delete his text messages. The claims were included in a broader enforcement procedure, which settled Deccan without admitting or denying any wrongdoing.
The Wall Street Journal reported last month that the settlements announced on Tuesday Likely to exceed a billion dollars It will be announced before the end of September.
Eight of the largest entities, including Goldman Sachs and Morgan Stanley, have agreed to pay $125 million to the SEC and at least $75 million to the CFTC. Jefferies will pay a total of $80 million to market regulators, and
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She agreed to pay $100 million. Cantor agreed to pay $16 million.
The SEC said it found “communications rife outside the channel.” In some cases, supervisors at banks were aware of employees and even encouraged the use of unauthorized messaging apps instead of communicating via company email or other approved platforms.
“Today’s actions – in terms of the companies involved and the scale of penalties required – underscore the importance of record-keeping requirements: they are sacrosanct. If there are allegations of wrongdoing or misconduct, we should be able to examine the books of the SEC,” said Gurber Grewal, director of enforcement at the SEC. and company records to determine what happened.”
Bank of America, which faced the CFTC’s highest fine, had “extensive and prolonged use of unapproved methods to engage in business-related communications,” according to the CFTC’s settlement order. “We use WhatsApp all the time, but we delete transfers regularly,” one trader wrote in a 2020 message to a colleague, according to the CFTC.
The Commodity Futures Trading Commission (CFTC) said one of the chiefs of the Bank of America’s trading desk asked subordinates to delete messages from their personal devices and communicate through the encrypted messaging app Signal. The CFTC said that trading desk chief resigned this year, even though the bank was aware of his conduct in 2021.
The agency said that a Nomura trader deleted messages from his personal device in 2019 after being told the CFTC wanted them to conduct an investigation. The regulator said the trader made false statements to the CFTC about his compliance with the records request.
Brokers-dealers must follow strict record-keeping rules designed to ensure that regulators have access to documents for oversight purposes. Companies that have settled with the Securities and Exchange Commission and the Commodity Futures Trading Commission have admitted that the behavior of their employees violates those regulations.
The brokerage arm of & Co. JP Morgan Pay 200 million dollars Last year he admitted that some employees used WhatsApp and other messaging tools to do business, which also violated the bank’s own policies.
Regulators discovered that some of JPMorgan’s communications, which should have been turned over for separate enforcement investigations, were not collected because they were sent on employees’ personal devices or apps that were not supervised by the bank.
write to Dave Michaels at [email protected]
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