Wall Street groups fined $555mn by regulators over Messaging Violations

Nine financial firms on Wall Street have reached an agreement to pay fines totaling $555 million for violations related to messaging in the most recent wave of record-keeping charges filed by US regulators. The US Securities and Exchange Commission (SEC) accused broker-dealers such as Wells Fargo and BNP Paribas of “extensive and longstanding failures to maintain and preserve electronic communications”. On Tuesday, the SEC announced that it had accepted combined penalties of $289 million from these firms. In addition to the SEC charges, five of the parent companies faced similar allegations brought by the Commodity Futures Trading Commission (CFTC).

On Tuesday, the CFTC imposed fines totaling $266 million on five swap dealers and futures brokers – BNP Paribas, SociΓ©tΓ© GΓ©nΓ©rale, Wells Fargo, Bank of Montreal, and Wedbush Securities – for messaging violations. These charges are the latest development in a wide-ranging regulatory crackdown on record-keeping failures, which has resulted in some bankers losing their jobs and prompted businesses to take stronger action against the inappropriate use of external messaging platforms. “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,” stated Gurbir Grewal, director of the SEC’s enforcement division.

According to the SEC, the companies involved admitted to using platforms like WhatsApp and Signal for business communications since at least 2019. The regulator noted that these firms failed to retain the “vast majority” of these messages. The CFTC stated that the companies failed to comply with its record-keeping requirements and neglected to diligently supervise their business dealings. “The commission’s message could not be more clear – record-keeping and supervision requirements are fundamental, and registrants that fail to comply with these core regulatory obligations do so at their own peril,” commented Ian McGinley, the CFTC’s director of enforcement. Wells Fargo agreed to pay the largest penalty, amounting to $200 million, while BNP Paribas and SociΓ©tΓ© GΓ©nΓ©rale are each facing fines of $110 million. Wells Fargo expressed satisfaction with the resolution of the matter, while BNP Paribas and SociΓ©tΓ© GΓ©nΓ©rale declined to provide a comment. Bank of Montreal stated that it was pleased to put the issue behind it and mentioned that it had made significant improvements to its compliance procedures in recent years. Moelis, Houlihan Lokey, Mizuho, and SMBC chose not to comment, while Wedbush did not respond to a request for comment. The remaining companies mentioned in the regulatory orders – Bank of Montreal, Mizuho, Houlihan Lokey Capital, Moelis & Company, Wedbush Securities, and SMBC Nikko Securities America – have agreed to pay fines ranging from $9 million to $60 million. Moelis, Houlihan Lokey, Mizuho, and SMBC declined to comment, while the others did not immediately respond to a request for comment. Grewal revealed that the SEC has taken 30 enforcement actions and issued over $1.5 billion in penalties related to record-keeping failures, while McGinley stated that the CFTC has initiated challenges against 18 businesses and has ordered over $1 billion in penalties. In September, eleven separate Wall Street banks and brokers agreed to pay fines exceeding $1.8 billion for similar charges brought by US regulators.


Source: https://www.ft.com/content/e5941fd0-4be1-4459-a9f5-116bc784cca8