Quick Facts
Overview
The Commodity Futures Trading Commission (CFTC) fined Banco Santander, S.A. (BSSA) and Santander US Capital Markets LLC (SanCap) a total of $500,000 for violations involving the use of unapproved communication methods by employees, leading to failures in preserving required business records.
The action also cited inadequate supervision of compliance with internal policies and CFTC regulations, though the firms received credit for exemplary cooperation and remediation efforts.
Details of the Case
From January 2021 onward, employees at BSSA, a registered non-U.S. swap dealer, and SanCap, a futures commission merchant, used unapproved methods like personal text messages for business-related communications. These messages, which included discussions on quotes, bids, offers, and trades, were not captured or preserved as required by CFTC rules.
Despite internal policies prohibiting such practices and providing annual training, the firms failed to monitor or archive these off-channel communications. A self-conducted sampling review revealed widespread non-compliance, and while no customer or market harm was identified, the lapses violated recordkeeping obligations under the Commodity Exchange Act and related regulations.
Additionally, the CFTC found that the firms did not maintain diligent supervisory systems to enforce compliance, resulting in further violations. In response, the firms cooperated by sharing review results, enhancing policies, increasing surveillance, and planning an internal audit.
WORKED EXAMPLES
Sampling Analysis of Personal Devices (2021)
A review of approximately 5% of U.S.-based associated persons' (APs—individuals registered to handle customer accounts) personal devices over a six-month period showed that all sampled APs used personal text messages for business communications, violating internal policies; some messages involved CFTC-regulated activities like swaps and futures, with the firms acknowledging this as representative of broader issues.
- Total sampled: About 5% of U.S. APs.
- Violation rate: 100% of sampled APs.
Use of Unapproved Methods for Business Communications (Ongoing from 2021)
Employees sent and received written messages related to Commission-regulated businesses, such as quotes, solicitations, bids, offers, instructions, trading, and prices leading to swaps or futures executions, via personal texts not monitored or archived.
Failure to Supervise Compliance with Policies (Relevant Period)
Despite policies prohibiting unapproved communications and regular compliance bulletins, the firms did not implement systems to detect or deter violations, as evidenced by repeated off-channel use.
Remediation Efforts Post-Investigation (Post-2021)
Firms enhanced policies, increased training on unapproved methods, boosted surveillance of personal devices, and initiated technology changes; an internal audit of U.S. Commission-regulated businesses is underway to assess communications compliance.
Fines and Penalties
The total fine is a civil monetary penalty of $500,000.
Key Quotes
"During the Relevant Period, Respondents’ employees communicated using unapproved methods. These written communications were sent and received by Respondents’ employees and included messages related to Respondents’ businesses as Commission registrants that were required to be maintained under Commission-mandated recordkeeping requirements."
"Respondents did not implement a diligent supervisory system to ensure compliance with Commission recordkeeping requirements and Respondents’ own policies and procedures."
"In accepting Respondents’ Offer, the Commission recognizes Respondents’ exemplary cooperation. The Commission’s recognition is reflected in a reduced penalty, with Respondents receiving the maximum cooperation mitigation credit toward the full monetary penalty appropriate for these violations."
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