Quick Facts
Overview
The Bank of New York Mellon (BNYM) and BNY Mellon Securities Corporation (BNYMSC) were fined $500,000 by the CFTC for violations involving the use of unapproved communication methods by employees, leading to failures in maintaining and preserving required business records.
The firms also failed to diligently supervise compliance with these requirements and their own internal policies. The penalty was reduced due to the firms' exemplary cooperation during the investigation.
Details of the Case
From May 2020 onward, employees at BNYM, a registered swap dealer, and BNYMSC, a registered introducing broker, used unapproved communication methods, such as personal text messages, for business-related discussions.
These communications were not monitored, reviewed, or archived, violating CFTC recordkeeping rules that require firms to preserve all transaction-related records, including pre-trade communications like quotes, bids, and offers. The firms' internal policies explicitly prohibited such unapproved methods and included annual training and reminders, but these were not effectively enforced.
A self-conducted review by the firms, prompted by the CFTC's investigation, confirmed widespread use of personal devices for business, though no known harm to customers or markets occurred.
The CFTC found that the firms failed to implement a diligent supervisory system to detect and prevent these violations. In response, the firms have enhanced policies, increased training, and adopted firm-approved messaging apps, while implementing recommendations from an independent compliance consultant.
WORKED EXAMPLES
Sampling Analysis of Personal Devices (2021)
A review of approximately 2% of associated persons' personal devices over a 12-month period (2020-2022) revealed that each sampled employee used personal texts for business communications.
Employees sent and received business-related messages via personal text messages, which were not preserved.
Policy Violations
Employees sent and received business-related messages via personal text messages, which were not preserved. The firms acknowledged this as likely representative of broader issues.
Fines and Penalties
The total fine is a civil monetary penalty of $500,000, payable jointly and severally by BNYM and BNYMSC.
Key Quotes
"Respondents’ employees communicated using unapproved methods. These written communications were sent and received by Respondents’ employees and included messages related to Respondents’ businesses. These written communications via unapproved methods were not maintained and preserved by Respondents." (From the CFTC Order's Summary section)
"Respondents did not implement a diligent supervisory system to ensure compliance with Commission recordkeeping requirements and Respondents’ own policies and procedures." (From the CFTC Order's Summary section)
"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." (From the CFTC Order's Summary section)
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