Key Points:
[US fines 16 Wall Street firms $1.8 billion for discussing deals and trades on personal apps.
The firms include Barclays (BARC.L), Bank of America, Citigroup, Credit Suisse (CSGN.S), Goldman Sachs, Morgan Stanley, and UBS (UBSG.S).
The inquiry is a landmark case for the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC).
Staff at all levels, including senior investment bankers and traders, were involved in the failures, which affected 16 firms.
One trader wrote on WhatsApp: “We use WhatsApp all the time, but we erase convos regularly”.
Another trader deleted statements that contained statements about trading that were incriminating, CFTC said.]
[Summary: US fines 16 Wall Street firms $1.8 billion for discussing deals and trades on personal apps. The firms include Barclays (BARC.L), Bank of America, Citigroup, Credit Suisse (CSGN.S), Goldman Sachs, Morgan Stanley, and UBS (UBSG.S). The inquiry is a landmark case for the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC). Staff at all levels, including senior investment bankers and traders, were involved in the failures, which affected 16 firms. One trader wrote on WhatsApp: “We use WhatsApp all the time, but we erase convos regularly”. Another trader deleted statements that contained statements about trading that were incriminating, CFTC said.]
On Tuesday, US regulators fined 16 financial firms a total of $1.8 billion. The firms include Barclays (BARC.L), Bank of America, Citigroup, Credit Suisse (CSGN.S), Goldman Sachs, Morgan Stanley, and UBS (UBSG.S).
The broad sector inquiry is a landmark case for the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC), marking one of their largest collective resolutions. It was originally reported by Reuters last year and then made public by other lenders.
The agencies stated that from January 2018 to September 2021, employees of the banks habitually talked with coworkers, clients, and other third-party advisers about business matters such as debt and equity dealings using personal messaging apps like WhatsApp and SMS messages.
In violation of federal regulations requiring broker-dealers and other financial firms to maintain business correspondence, the institutions failed to keep the majority of those personal conversations.
The agencies argued that this made it more difficult for them to monitor the financial markets, guarantee adherence to important regulations, and acquire information for unrelated investigations.
UBS, Morgan Stanley, and Citi spokespeople all expressed their happiness with the outcome of the situation. Credit Suisse, Barclays, Nomura, Goldman Sachs, and Bank of America each declined to comment, according to Reuters.
“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,” said Gurbir Grewal, director of the SEC’s Division of Enforcement. “If there are allegations of wrongdoing or misconduct, we must be able to examine a firm’s books and records,” added Grewal.
According to the SEC, employees at all levels, including senior and junior investment bankers and traders, were involved in the failures, which affected all 16 firms.
Although Bank of America and Nomura did not explicitly confirm or deny all of the CFTC’s investigative findings, the companies’ admission of the facts and admission that they broke the law was a significant success for the agencies, it added.
According to the SEC, the institutions that cooperated with the inquiry have started implementing changes to their compliance policies and procedures.
The use of personal devices at work has always been a problem for Wall Street banks, which often ban them completely from trading floors. However, during the pandemic, as more bankers and traders worked from home, the problem grew acute.
Staff members used personal apps to avoid oversight, according to CFTC Commissioner Christy Goldsmith Romero, sometimes at the request of senior executives who were aware of their violations of bank policies but wanted to conceal trading communications.
She gave the staff at Bank of America as an example, and one trader wrote on WhatsApp: “We use WhatsApp all the time, but we erase convos regularly.” The head of a trading desk routinely directed traders to delete messages on personal devices and to use Signal, including during the CFTC’s probe.
Another instance included a Nomura trader who, after receiving a request to preserve documents from the CFTC, deleted messages that contained statements about trading that were incriminating, according to her office.
“Those choosing to participate in U.S. financial markets are on notice: the era of evasive communications practices is over,” Goldsmith Romero said in a statement.
