Wall Street Faces Nearly $2B in Penalties Over Record Keeping

Regulators point out failure of companies to protect ‘off-channel’ text messaging

Published September 28, 2022

The U.S. Securities and Exchange Commission (SEC) and the U.S. Commodity Futures Trading Commission (CFTC) have actually imposed more than $1.8 billion in charges on different Wall Street companies for record-keeping failures. The SEC action targets 16 companies, with 11 of them having actually accepted pay a combined $1.1 billion. The CFTC action covers 11 organizations, with overall charges in excess of $710 million.

The SEC states in its statement that there has actually been “extensive and longstanding failures by the companies and their workers to keep and maintain electronic interactions.” The CFTC suggests that the 11 companies targeted by its action have actually been guilty of “stopping working to preserve, maintain, or produce records that were needed to be kept under CFTC recordkeeping requirements, and stopping working to vigilantly monitor matters connected to their organizations as CFTC registrants.”

Key Takeaways

  • The SEC and the CFTC have actually imposed combined charges of almost $2 billion on a variety of leading monetary companies.
  • The primary problem is these companies’ failure to maintain records of text messaging in between workers, which they were needed to do.

Targets of the SEC Action

The SEC fined each of these 8 companies, consisting of 5 affiliates, $125 million each:

  • Barclays Capital Inc.
  • BofA Securities Inc., together with Merrill Lynch, Pierce, Fenner & Smith Inc.
  • Citigroup Global Markets Inc.
  • Credit Suisse Securities (USA) LLC
  • Deutsche Bank Securities Inc., together with DWS Distributors Inc. and DWS Investment Management Americas, Inc.
  • Goldman Sachs & Co. LLC
  • Morgan Stanley & Co. LLC, together with Morgan Stanley Smith Barney LLC
  • UBS Securities LLC, together with UBS Financial Services Inc.

Additionally, charges of $50 million are being evaluated on Jefferies LLC and Nomura Securities International, Inc. Cantor Fitzgerald & Co. has actually concurred to pay a $10 million charge.

Targets of the CFTC Action

The 11 companies being fined by the CFTC, and their particular charges, are:

  • Bank of America (Bank of America, N.A.; BofA Securities, Inc.; and Merrill Lynch, Pierce, Fenner & Smith Incorporated, which was signed up as an FCM till May 2019 and is presently signed up as a presenting broker), $100 million
  • Barclays (Barclays Bank, PLC and Barclays Capital Inc.), $75 million
  • Cantor Fitzgerald (Cantor Fitzgerald & Co.), $6 million
  • Citi (Citibank, N.A.; Citigroup Energy Inc.; and Citigroup Global Markets Inc.), $75 million
  • Credit Suisse (Credit Suisse International and Credit Suisse Securities (USA) LLC), $75 million
  • Deutsche Bank (Deutsche Bank AG and Deutsche Bank Securities Inc.), $75 million
  • Goldman Sachs (Goldman Sachs & Co. LLC f/k/a Goldman Sachs & Co.), $75 million
  • Jefferies (Jefferies Financial Services, Inc. and Jefferies LLC), $30 million
  • Morgan Stanley (Morgan Stanley & Co. LLC; Morgan Stanley Capital Services LLC; Morgan Stanley Capital Group Inc.; and Morgan Stanley Bank, N.A.), $75 million
  • Nomura (Nomura Global Financial Products Inc.; Nomura Securities International, Inc.; and Nomura International PLC), $50 million
  • UBS (UBS AG; UBS Financial Services, Inc.; and UBS Securities LLC), $75 million

Note that, while the CFTC news release shows that more than $710 million in fines have actually been imposed versus these 11 companies, the figures above amount to just $661 million.

The Text Messaging Issue

The SEC examination “exposed prevalent off-channel interactions.” More particularly: “From January 2018 through September 2021, the companies’ workers regularly interacted about company matters utilizing text messaging applications on their individual gadgets. The companies did not preserve or protect the significant bulk of these off-channel interactions, in infraction of the federal securities laws.”

The CFTC news release shows that each of the 11 companies that it targeted: “stopped working to stop its workers, consisting of those at senior levels, from interacting both internally and externally utilizing unapproved interaction approaches, consisting of messages sent out through individual text, WhatsApp or Signal.” The CFTC states, these companies “usually did not keep and maintain these composed interactions,” which they were needed to do.

Paying the fines is barely completion of the line for the banks included. Numerous of them, consisting of Citigroup Inc, and Goldman Sachs Group Inc., need to now to employ compliance specialists to make sure correct job-related interactions, consisting of those by phone, according to Bloomberg.

Investopedia needs authors to utilize main sources to support their work. These consist of white documents, federal government information, initial reporting, and interviews with market specialists. We likewise reference initial research study from other credible publishers where proper. You can find out more about the requirements we follow in producing precise, impartial material in our editorial policy.

» & raquo; Read More

Leave a Reply

Your email address will not be published. Required fields are marked *