U.S. regulators on Tuesday fined 16 financial firms, including Barclays, Bank of America , Citigroup, Credit Suisse, Goldman Sachs , Morgan Stanley and UBS, a combined $1.8 billion after staff discussed deals on their personal devices and apps.
The sweeping industry probe, which was first reported by Reuters last year and was subsequently disclosed by multiple lenders, is a landmark case for the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC), marking one their largest collective resolutions, regulatory experts said.
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 which require broker-dealers and other financial institutions to preserve business communications. That likely impeded the agencies’ ability to gather evidence in other, unrelated investigations, they said.
“Today’s actions – both in terms of the firms involved and the size of the penalties ordered – underscore the importance of recordkeeping 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 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.
In a major victory for the agencies, the institutions admitted the facts and acknowledged that they violated federal laws, although Bank of America and Nomura neither admitted nor denied aspects of the CFTC’s investigative findings, it said.
The institutions, which cooperated with the investigation, have begun implementing improvements to their compliance policies and procedures, the SEC said.
Spokespeople for UBS, Morgan Stanley and Citi said the banks were pleased to have resolved the matter. Bank of America, Barclays, Goldman Sachs, Nomura and Credit Suisse declined to comment.
(Reporting by Eric Beech and Michelle Price in Washington; additional reporting by Pete Schroeder, Saeed Azhar and Lananh Nguyen; Editing by Caitlin Webber, Lisa Shumaker and Aurora Ellis)