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September 27, 2022 at 05:42 PM
The Securities and Exchange Commission announced charges and $1.1 billion of fines affecting 15 broker-dealers and one affiliated investment advisor on Tuesday, while the Commodity Futures Trading Commission imposed $710 million in penalties on 11 financial institutions over employees routinely communicating about business matters using text messaging applications such as WhatsApp on their personal devices.
Combined with JPMorgan’s $200 million regulatory fine, which regulators announced in December, the total level of penalties over these record-keeping lapses stands at $2.01 billion.
According to the SEC, the financial firms it imposed fines on did not maintain or preserve the substantial majority of these off-channel communications. The firms admitted the facts set forth in their respective SEC orders, acknowledged that their conduct violated recordkeeping provisions of the federal securities laws and agreed to pay combined penalties of $1.1 billion.
The following eight firms (and five affiliates) will pay $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; and
- UBS Securities LLC together with UBS Financial Services Inc.
Two firms agreed to pay penalties of $50 million each:
Cantor Fitzgerald & Co. agreed to pay a $10 million penalty.
From January 2018 through September 2021, the firms’ employees “routinely communicated about business matters using text messaging applications on their personal devices,” the SEC said.
“The firms did not maintain or preserve the substantial majority of these off-channel communications, in violation of the federal securities laws. By failing to maintain and preserve required records relating to their businesses, the firms’ actions likely deprived the Commission of these off-channel communications in various Commission investigations,” it explained.
The failings occurred across all of the 16 firms and involved employees at multiple levels of authority, including supervisors and senior executives, according to the agency.
The fines have been anticipated for months. Morgan Stanley and UBS were among firms who disclosed this summer that they were expecting fines for unauthorized messaging.
