The SEC and CFTC have fined 11 Wall Street banks and brokers for record keeping failures related to electronic communications. The penalties come after a series of investigations by the US regulators amid concerns over financial firm's use of messaging platforms like WhatsApp.
These latest fines come as no surprise. News about non-compliance with communications rules has dominated the financial press over the past years. We have seen multiple cases of traders being dismissed for the use of platforms like WhatsApp and tier one banks being fined multi-millions for compliance breaches.
The latest investigations by the SEC and CFTC uncovered extensive communications on unauthorized platforms among both senior and junior staff members at top tier brokers and banks.The financial firms have settled matters by:
acknowledging that their conduct violated record keeping rules,
agreeing to pay combined penalties of over $1.8 billion to the SEC and the CFTC, and
setting out plans to improve their compliance policies and procedures.
Several of the firms involved have also committed to hiring a compliance consultant whose sole purpose will be to assess how the firms are monitoring and archiving employee communications.
A statement issued by one of the tier one banks at the center of the fines stated: "We have 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.”
Communications record keeping and surveillance is a fundamental compliance requirement designed to detect and prevent illegal activities like insider trading, unlawful information sharing, and market manipulation. These rules are a key component of financial regulation and exist to ensure transparent and fair trading and stable markets.
Commenting on the fines, SEC Chairman, Gary Gensler, said:“Finance, ultimately, depends on trust. By failing to honor their record keeping and books-and-records obligations, the market participants we have charged today have failed to maintain that trust.”
He continued: “Since the 1930s, such record keeping has been vital to preserve market integrity. 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. As part of our examinations and enforcement work, we will continue to ensure compliance with these laws.”
In the CFTC announcement about the fines, chairman Rostin Behnam, said: "The Commission’s record keeping and supervision requirements ensure the safety and integrity of the U.S. derivatives markets and protect customers and market participants. As demonstrated today, the Commission will vigorously pursue registrants who fail to comply with their core regulatory obligations and hold them accountable.”
Learn more about the communications record keeping rules here. You can also learn about the SEC’s and CFTC’s record keeping and surveillance rules here: