Wells Fargo and BNP Paribas are among the recent recipients of substantial fines imposed by US regulators due to employee usage of unofficial communication platforms such as WhatsApp and iMessage.
The US Securities and Exchange Commission (SEC) has taken action against 11 firms, including Bank of Montreal and units of Mizuho Financial Group, for their consistent and widespread failure to adequately maintain and retain electronic communications. The total penalties imposed on these companies amount to $289 million, with the largest sum, $125 million, being charged to Wells Fargo units.
Additionally, the Commodity Futures Trading Commission (CFTC) has also penalized several of the same firms, including units of Wells Fargo and Bank of Montreal, for similar violations, resulting in a collective fine of $266 million.
These recent settlements follow the SEC’s previous move in September, where it imposed fines totalling $1.1 billion on firms such as Bank of America, Citi, and Goldman Sachs.
The investigation
The investigations centred around the use of personal messaging services by traders and brokers to discuss investment terms, client meetings, and other business matters. Utilizing platforms like WhatsApp and similar services for official bank-related communication breaches regulatory mandates. However, the shift to remote work during the pandemic led to an increase in the use of such unofficial channels.
The implicated firms admitted that since at least 2019, their employees frequently engaged in business-related discussions via iMessage, WhatsApp, and Signal. However, they failed to retain or archive a majority of these off-channel communications, which is a direct violation of federal securities laws.
The SEC’s enforcement division has now issued penalties exceeding $1.5 billion.
The SEC said that while certain broker-dealers and investment advisers have voluntarily disclosed violations or enhanced their internal policies, today’s actions underscore that many entities have not taken adequate measures.
