Federal regulators continued their crackdown against employees of Wall Street firms using private messaging apps to communicate, with 11 brokerage firms and investment advisers agreeing Tuesday to pay $549 million in fines.
Wells Fargo, BNP Paribas, Société Générale and Bank of Montreal were hit with the biggest penalties by the Securities and Exchange Commission and the Commodity Futures Trading Commission. Together, the brokerage and investment advisory arms of those four financial institutions accounted for nearly 90 percent of the fines, according to statements released by the regulators.
The latest round of fines adds to the nearly $2 billion in penalties against big Wall Street banks announced last year for similar violations. In all, the regulators have now penalized more than two dozen banks and investment firms for not properly policing employees use of “off channel” messaging services like WhatsApp, iMessage and Signal.
The S.E.C. charged the financial institutions for failing to properly “maintain and preserve” all official communications by their employees. Federal securities laws require banks and investments firms to maintain records and make sure their employees are not conducting company business using unauthorized means of communication.
The use of private message services flourished during the pandemic, when many bank employees were working from home. The S.E.C. has said banks and investment firms should have taken more steps to ensure that employees were not misusing private messaging services to conduct business.
The S.E.C. has said that use of off-channel communications could stymie investigations because a lack of record-keeping of those communications could obscure potential wrongdoing.
“Record-keeping failures such as those here undermine our ability to exercise effective regulatory oversight, often at the expense of investors,” Sanjay Wadhwa, the S.E.C.’s deputy director of enforcement, said in a statement. “Registrants that fail to comply with these core regulatory obligations do so at their own peril,” said Ian McGinley, the C.F.T.C.’s enforcement director.
The S.E.C. said in its statement that all the firms had admitted “their conduct violated record-keeping provisions of the federal securities laws” and have begun putting in pace compliance policies to police off-channel communications by employees.
Matthew Goldstein
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