SEC and CFTC Fine 13 Wall Street Firms a Combined $549M for Recordkeeping Failures

This morning, the SEC and CFTC released separate statements announcing they would be issuing fines totaling $289 million and $260 million respectively to a combined 13 firms for their use of unauthorized messaging platforms. The SEC identified 11 negligent firms in their press release, while the CFTC called out four. Two separate firms were named in both reports.

While recent instances of similar fines have primarily centered around unauthorized communications on WhatsApp, the SEC confirmed in its press release that, in addition to the popular instant messaging app, iMessage and Signal were also being used improperly by regulated employees across the 11 firms in their report. The regulators also stated that the actions date back to at least 2019. 

The announcements may not be of great surprise to those who have been following this space, as North American regulators handed out a record number of fines in 2022 and kept the momentum going into 2023. However, while 2022 seemed to be the year for press-grabbing fines amongst some of the financial services industry’s largest players, regulators appeared to be focusing more on small to mid-sized firms in 2023, with the monetary value of the fines being significantly less than what took place in 2022. This morning’s announcements by the two largest regulating bodies in North America are sure to put financial firms of all sizes back on high alert though. 

To date, the CFTC has imposed $1.091 billion in civil monetary penalties against 18 financial institutions for their use of unapproved methods of communication, while the SEC has brought 30 enforcement actions and ordered over $1.5 billion in penalties. Undoubtedly, many firms have seen these enforcement actions as a sign to tighten their internal monitoring policies and procedures when it comes to the use of improper channels in their organization. However, many firms have continued to take a gamble in the hopes that they avoid the regulator’s next wave of crackdowns. The SEC’s Director of Divisions of Enforcement summed up this point by saying, “While some broker-dealers and investment advisers have heeded this message, self-reported violations, or improved internal policies and procedures, today’s actions remind us that many still have not.” He continued, “so here are three takeaways for those firms who haven’t yet done so: self-report, cooperate, and remediate. If you adopt that playbook, you’ll have a better outcome than if you wait for us to come calling.” 

SteelEye’s 2023 Annual Compliance Health Check Report revealed that 71% of firms are investing in eComms monitoring in response to the increased fines over the last 18 months. However, the report also discovered that only 50% of firms are actively monitoring WhatsApp, leaving half of the market vulnerable to future fines similar to what was handed out today. After today’s announcement, it seems likely that many firms will be revisiting these objectives with renewed urgency.  

About SteelEye

Turn Supervision into Super Vision. SteelEye is the first and only fully integrated trade and communications surveillance solution. We empower financial firms with the data-driven tools and complete insights they need to focus on what matters, all from a single platform.

State-of-the-art algorithms and intelligent alerts proactively detect market manipulation and compliance breaches, while our holistic data model – which combines communications, trades, orders, news, and market data – provides intelligent insights and deep analytics. Founded in 2017, SteelEye has offices in the UK, North America, Portugal, and India.


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