American fines 16 Wall Street companies $ 1.8 billion for talking about deals and trades on personal applications

(Reuters) – US regulators on Tuesday fined 16 financial firms, including Barclays Bank (Barkel)Bank of America, Citigroup, and Credit Suisse (CSGN.S)and Goldman Sachs, Morgan Stanley, and UBS (UBSG.S)$1.8 billion after employees discussed deals and deals on their personal devices and apps.

The sweeping industry investigation, first reported by Reuters last year and later revealed by several lenders, is a landmark case for the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC), marking one of their biggest collective decisions.

From January 2018 through September 2021, the agencies said, bank employees routinely communicated about business matters such as debt and equity deals with colleagues, clients and third-party advisors using apps on their personal devices such as text messages and WhatsApp.

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The institutions did not maintain the majority of those conversations in person, violating federal rules requiring intermediaries, merchants, and other financial institutions to maintain business contacts. This hampered the agencies’ ability to oversee financial markets, ensure compliance with key rules, and gather evidence in other unrelated investigations, the agencies said.

Spokespeople for UBS, Morgan Stanley and Citi said the banks were pleased to have the matter resolved. Bank of America, Barclays, Goldman Sachs, Nomura and Credit Suisse declined to comment.

“Today’s actions – in terms of the companies involved and the scale of penalties imposed – underscore the importance of record-keeping requirements: they are sacrosanct. If there are allegations of wrongdoing or misconduct, we should be able to scrutinize the books of the company,” said Gurbert Grewal, director of enforcement at the SEC. .

The failures occurred in all 16 companies and involved employees at multiple levels, including senior bankers, junior investment bankers and traders, the SEC said.

In a major victory for the agencies, the institutions acknowledged the facts and admitted they had violated federal laws, although Bank of America and Nomura neither admitted nor denied aspects of the findings of the CFTC’s investigation.

The Securities and Exchange Commission said institutions that cooperated with the investigation have begun implementing improvements to their compliance policies and procedures.

“Delete CONVOS”

Wall Street banks have struggled for years to eliminate the use of personal devices at work – often completely barring them from the trading floor – but the problem has become acute as bankers and merchants have worked from their homes during the pandemic.

According to CFTC Commissioner Kristi Goldsmith Romero, employees used personal apps to evade censorship, sometimes at the direction of top executives who knew they were violating bank policies but wanted to obfuscate business communications.

In one example cited by her office, Bank of America employees used WhatsApp, with one trader writing, “We use WhatsApp all the time but delete transfers on a regular basis.” The head of the trading desk routinely instructed traders to delete messages on personal devices and use Signal, including during a CFTC investigation.

In another example, a Nomura trader deleted the messages, which included statements denouncing trading, after the Commodity Futures Trading Commission sent a request to preserve the documents, her office said.

“Those who choose to participate in US financial markets know: The era of dodgy communications practices is over,” Goldsmith Romero said in a statement.

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(Reporting by Eric Beach and Michael Price in Washington). Additional reporting by Pete Schroeder, Saeed Azhar and Nan Nguyen; Editing by Caitlin Webber, Lisa Shumaker, Aurora Ellis and Richard Chang

Our criteria: Thomson Reuters Trust Principles.

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