Banks have now been hit with a whopping $549 million in penalties by the SEC for failing to maintain electronic records of employee communications.
U.S. regulators on Tuesday announced a combined $549 million in penalties against Wells Fargo and 10 other smaller or non-U.S. firms.
The Securities and Exchange Commission disclosed charges and $289 million in fines against 11 firms for “widespread and longstanding failures” in record-keeping, while the Commodity Futures Trading Commission also said it fined four banks a total of $260 million for failing to maintain records required by the agency.
“It was regulators’ latest effort to stamp out the pervasive use of secure messaging apps like Signal, Meta’s WhatsApp or Apple’s iMessage by Wall Street employees and managers.
Starting in late 2021, the watchdogs secured settlements with bigger players including JPMorgan Chase, Goldman Sachs, Morgan Stanley and Citigroup.
Fines related to the issue total more than $2 billion, according to the SEC and CFTC,” reports CNBC.
“Today’s actions stem from our continuing sweep to ensure that regulated entities, including broker-dealers and investment advisers, comply with their recordkeeping requirements, which are essential for us to monitor and enforce compliance with the federal securities laws,” Sanjay Wadhwa, deputy director of enforcement at the SEC, said in the release.
The firms admitted that from at least 2019, employees used side channels like WhatsApp to discuss company business, failing to preserve records “in violation of federal securities laws,” the SEC said Tuesday.
Wells Fargo Was The Biggest Offender
Wells Fargo, the fourth-biggest U.S. bank by assets and a relatively small player on Wall Street, racked up the most fines on Tuesday, with $200 million in penalties.
“We are pleased to resolve this matter,” said Wells Fargo spokeswoman Laurie Kight.
French banks BNP Paribas and Societe Generale were fined $110 million each, while the Bank of Montreal was fined $60 million.
The SEC also fined Japanese firms Mizuho Securities and SMBC Nikko Securities and boutique U.S. investment banks inc.
The other banks penalized Tuesday declined to comment, says CNBC.
“On Wall Street, company records of emails and other communications via official channels are often automatically generated to adhere to requirements that clients are treated fairly.
But after some of the industry’s biggest scandals of the past decade hinged on incriminating messages preserved in chatrooms, workers often leaned on side channels to conduct business.”
Apart from the fines, banks were ordered to “cease and desist” from future violations and hire consultants to review bank policies, the SEC said.
Other Banking Communication Scandals
The bank was fined $4 million by the U.S. Securities and Exchange Commission after about 47 million emails belonging to its retail banking group were mistakenly and permanently deleted according to Reuters.
The emails dated from Jan. 1 to April 23, 2018, and were deleted in June 2019 from about 8,700 mailboxes, including those belonging to as many as 7,500 employees who regularly worked with customers.
Many of the emails were business records that the largest U.S. bank was required under SEC rules to keep for three years.
According to the SEC, JPMorgan has been unable in at least 12 civil securities-related regulatory probes to comply with subpoenas and document requests for communications that had been permanently deleted.
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