Bank of America, Morgan Stanley and UBS are among several firms together ordered to pay about $1.8 billion over failures related to preserving their employees’ electronic communications, which have been in regulators’ crosshairs for years.
The Securities and Exchange Commission announced in a statement that it fined 15 broker-dealers and one affiliated investment advisor firm a total of more than $1.1 billion for widespread and long-standing “failures by the firms and their employees to maintain and preserve electronic communications.” According to the commission, the companies didn’t properly keep records of “off-channel communications” via text messaging apps on personal devices.
BofA, together will Merrill Lynch, Morgan Stanley, UBS, Citigroup Global Markets, Goldman Sachs, Credit Suisse Securities, Barclays Capital and Deutsche Bank Securities, each agreed to pay a penalty of $125 million, according to the SEC.
Jefferies and Nomura Securities International agreed to pay penalties of $50 million each, and Cantor Fitzgerald & Co. agreed to pay a penalty of $10 million, the SEC says.
All of the firms agreed to the fines and admitted the SEC’s findings, according to the regulator.
“As technology changes, it’s even more important that registrants appropriately conduct their communications about business matters within only official channels, and they must maintain and preserve those communications,” SEC chair Gary Genlser said in a written statement.
Morgan Stanley, UBS, Citi, Goldman Sachs, Deutsche Bank, Credit Suisse and Barclays also agreed to each pay $75 million to the Commodity Futures Trading Commission, which announced Tuesday that it settled charges with 11 firms over failures “to stop its employees, including those at senior levels, from communicating both internally and externally using unapproved communication methods, including messages sent via personal text, WhatsApp or Signal.”
BofA, meanwhile, agreed to pay $100 million to the CFTC, according to the regulator.
In addition, Nomura agreed to a penalty of $50 million, Jefferies is paying a penalty of $30 million, and Cantor Fitzgerald is paying $6 million, the CFTC says.
As with the SEC settlements, the firms in the CFTC settlements admitted the facts presented by the regulator, “with Bank of America and Nomura neither admitting nor denying certain specific findings of the Division of the Enforcement’s investigation,” the CFTC said.
Over the past few years, the SEC and the CFTC reportedly grew frustrated by their inability to investigate financial professionals’ communications because their employers didn’t properly monitor and archive them, leading to a settlement of $200 million with JPMorgan last December.
That settlement in turn led the SEC to launch an industrywide sweep.
Morgan Stanley was the next large Wall Street firm to reach a settlement of $200 million with the two regulators. That settlement was announced last month.
Over the past few weeks, BofA, Citigroup and UBS disclosed that they were targeted by the SEC and CFTC investigation as well.
In the Tuesday announcement, the SEC made it clear that it’s not done pursuing the matter.
“In line with this first-of-its-kind group resolution and our December 2021 settlement with JPMorgan Securities, the staff will continue its efforts to enforce compliance with the Commission’s essential recordkeeping requirements,” Sanjay Wadhwa, the SEC’s deputy director of enforcement, said in a statement announcing the most recent penalties.