US fines 16 Wall Street firms $2.6b for talking deals, trades on personal apps
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Wall Street banks have for years struggled to stamp out the use of personal devices at work.
PHOTO: REUTERS
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WASHINGTON - United States regulators on Tuesday fined 16 financial firms, including Barclays, Bank of America, Citigroup, Credit Suisse, Goldman Sachs, Morgan Stanley and UBS, a combined US$1.8 billion (S$2.6 billion) after staff discussed deals and trades on their personal devices and apps.
The sweeping industry probe is a landmark case for the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC), marking one their largest collective resolutions.
From January 2018 through September 2021, the banks' staff routinely communicated about business matters such as debt and equity deals with colleagues, clients and other third party advisers using applications on their personal devices such as text messages and WhatsApp, the agencies said.
The institutions did not preserve the majority of those personal chats, violating federal rules that require broker-dealers and other financial institutions to preserve business communications. That impeded the agencies' ability to oversee financial markets, ensure compliance with key rules, and gather evidence in other unrelated investigations, the agencies said.
"Today's actions - both in terms of the firms involved and the size of the penalties ordered - underscore the importance of record-keeping requirements: they're sacrosanct. If there are allegations of wrongdoing or misconduct, we must be able to examine a firm's books and records," said Mr Gurbir Grewal, director of the SEC's division of enforcement.
The failings occurred across all 16 firms and involved employees at multiple levels, including senior and junior investment bankers and traders, the SEC said.
The institutions, which cooperated with the investigation, have begun implementing improvements to their compliance policies and procedures, it added.
Wall Street banks have for years struggled to stamp out the use of personal devices at work - often banning them altogether from trading floors - but the problem became acute as bankers and traders worked from home during the pandemic.
According to CFTC commissioner Christy Goldsmith Romero, staff used personal apps to evade oversight, sometimes at the direction of senior executives who knew they were violating bank policies but wanted to obfuscate trading communications.
In one example cited by her office, Bank of America staff used WhatsApp, with one trader writing: "We use WhatsApp all the time but we delete convos (conversations) regularly." The head of a trading desk routinely directed traders to delete messages on personal devices and to use Signal, including during the CFTC's probe.
In another example, a Nomura trader deleted messages, which included incriminating statements about trading, after the CFTC sent a request to preserve documents, her office said.
"Those choosing to participate in US financial markets are on notice: the era of evasive communications practices is over," Ms Goldsmith Romero said in a statement. REUTERS
