On Tuesday, the Securities and Exchange Commission (SEC) imposed a collective fine of $549 million on Wall Street firms for not maintaining electronic transcripts of employee conversations. The SEC charged the 11 firms with "widespread and longstanding" infractions, including letting personnel use untracked messaging services, like Whatsapp and Signal, for conversation. Wells Fargo, the largest US bank, was among the banking institutions subjected to the punishments.
On Tuesday, US regulators imposed a total of $549 million in penalties on Wells Fargo and other minor or overseas companies who did not follow electronic record keeping laws. This comes as part of the watchdogs' mission to stop the use of hidden messaging apps like Signal, Meta's WhatsApp, and iMessage by Wall Street staffers and supervisors. Since the end of 2021, organizations like JPMorgan Chase, Goldman Sachs, Morgan Stanley, and Citigroup have faced fines that add up to more than $2 billion. Sanjay Wadhwa, Deputy Director of Enforcement at the SEC, remarked that these charges are related to their efforts to monitor and enforce compliance with the federal securities laws.
The firms in question accepted that since at least 2019, their employees had been utilizing these side channels to talk about company matters, thus breaking federal securities regulations. The Securities and Exchange Commission disbursed charges as well as $289 million in fines to 11 entities on Tuesday, with the Commodity Futures Trading Commission adding $260 million in fines for the four involved banking groups.
Wells Fargo, the fourth largest bank in the U.S. by assets, experienced the highest number of fines on Tuesday, with a penalty of $200 million. Spokesperson Laurie Kight stated that they are “pleased to resolve this matter.” French banks BNP Paribas and Societe Generale were charged $110 million each, and the Bank of Montreal was fined $60 million. Other companies, including Japanese firms Mizuho Securities and SMBC Nikko Securities, U.S. investment banks Houlihan Lokey, Moelis and Wedbush Securities were also fined by the SEC. Jeff Roman of Bank of Montreal commented that they have “made significant enhancements to our compliance procedures in recent years” and are pleased to have the issue resolved. The other banks fined on Tuesday declined to comment. In addition to the fines, banks were instructed to “cease and desist” any future violations and hire analysts to inspect their policies, the SEC stated. After numerous scandals occurred in the past decade involving incriminating messages saved in chatrooms, individuals have been turning to unofficial modes of communication to perform transactions on Wall Street.
Messages sent with encryption on third-party platforms such as Signal cannot be logged and stored by banks. On Tuesday, regulators reported that this was a widespread pattern across Wells Fargo and other banks, with even supervisors responsible for enforcing the regulations taking part. A review of 13 employees at Wells Fargo found that they had all violated the bank's communication regulations by exchanging texts with more than 100 individuals, including senior supervisors. The Commodity Futures Trading Commission (CFTC) stated that this practice was not going on discretely, but "certain supervisors—the very people responsible for supervising employees to prevent this misconduct—routinely communicated using unapproved methods" on their personal devices. — CNBC's Jim Forkin provided assistance on this report.
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