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SEC, CFTC Fine Wall Street Banks for Record-Keeping Failures

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The U.S. regulators – Securities and Exchange Commission (“SEC”) and the Commodity Futures Trading Commission (“CFTC”) – have penalized several major Wall Street banks over “widespread and longstanding failures” to maintain and preserve records of electronic communications between traders and their clients.

Some of the big names are Barclays (BCS - Free Report) , Bank of America (BAC - Free Report) , Citigroup, Credit Suisse, Goldman Sachs (GS - Free Report) , Morgan Stanley (MS - Free Report) and UBS Group AG. The firms (in aggregate) will be paying more than $1.8 billion to the SEC and the CFTC combined to resolve the matter.

Among the Wall Street banks, Bank of America is facing the largest fine of $225 million, while others, including BCS, MS and GS, will be paying $200 million each. The BAC’s penalty dwarfs the prior fines for similar allegations. In December 2021, JPMorgan (JPM - Free Report) agreed to pay $200 million penalty for its failure to monitor business-related communications on platforms like WhatsApp. Of the total amount to be paid by JPM, $125 million will go to the SEC and $75 million to the CFTC.

Case Backdrop

The industry-wide investigations conducted by the SEC and the CFTC laid bare “pervasive off-channel communications” from the personal electronic devices between banks’ personnel and their clients between January 2018 and September 2021. Also, these “off-channel communications” were not maintained or preserved in clear violation of the federal securities provisions.

The firms need to retain “certain of these written communications because they related to the firms’ businesses.” By not following these regulations, the regulators’ capability to supervise financial markets, guarantee compliance with vital rules, “and gather evidence in other, unrelated investigations” was hampered.

While Wall Street has always struggled not to communicate about business matters using text messages and WhatsApp on their personal devices, the problem became more severe during the pandemic as employees worked from home. The bank employees, including “senior and junior investment bankers and debt and equity traders,” were found to be violating the securities laws.


The SEC chairman, Gary Gensler, said, “Finance, ultimately, depends on trust. By failing to honor their recordkeeping and books-and-records obligations, the market participants we have charged today have failed to maintain that trust.”

The Wall Street banks admitted to the facts in their respective settlement orders with the regulators. However, BAC and a Japan-based investment bank neither admitted nor denied certain findings of the CFTC. The companies have also started “implementing improvements to their compliance policies and procedures to settle these matters.”

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