Two US regulators announced on Tuesday that financial institutions, including Goldman Sachs, Bank of America, and Morgan Stanley, were hit with $1.8 billion in penalties over incidences of their staff using personal devices to discuss work-related matters, which is a violation of record-keeping regulations in United States securities laws.
SEC Chair Gary Gensler said in a statement, “From January 2018 through September 2021, the firms’ employees routinely communicated about business matters using text messaging applications on their personal devices. The firms did not maintain or preserve the substantial majority of these off-channel communications, in violation of the federal securities laws.”
The SEC’s penalties totaled $1.1 billion, levied against 15 broker-dealers, including, Barclays Capital (BCS), Bank of America, Citigroup (C), Credit Suisse (CS), Deutsche Bank, Goldman Sachs, Morgan Stanley, UBS Securities, Jefferies, Nomura Securities, and Cantor Fitzgerald. The Commodity Futures Trading Commission (CFTC) levied $710 million in fines against 11 institutions.
Gensler added, “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 moves were part of a recent push to more heavily scrutinize which platforms are used by employees to discuss work-related matters. Last year, JPMorgan Chase was hit with a $125 million SEC fine after regulators found, “widespread and longstanding failures” to preserve employee communications from employees who were using WhatsApp, email, and text to discuss securities-related matters.
A Deutsche Bank spokesperson said, “We fully cooperated with our regulators on this industry-wide matter. 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.”
The SEC’s Gensler stated, “As technology changes, it’s even more important that registrants appropriately conduct their communications about business matters within only official channels, and they must maintain and preserve those communications.”
Barclays Capital, BofA Securities together with Merrill Lynch, Pierce, Fenner & Smith, Citigroup Global Markets Inc., Credit Suisse Securities, Deutsche Bank Securities together with DWS Distributors and DWS Investment Management Americas, Goldman Sachs, Morgan Stanley together with Morgan Stanley Smith Barney, and UBS Securities together with UBS Financial Services all agreed to pay $125 million each over the SEC’s charges. Jefferies and Nomura Securities International settled for fines of $50 million each, as Cantor Fitzgerald paid $10 million.
With respect to the CFTC’s fines, Bank of America shelled out $100 million, the largest sum; Barclays, $75 million; Cantor Fitzgerald $6 million; Citi, $75 million; Credit Suisse $75 million; Deutsche Bank, $75 million; Goldman Sachs, $75 million; Jefferies, $30 million; Morgan Stanley, $75 million; Nomura, $50 million; and UBS, $75 million.
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