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10 Aug, 2023
1 min time to read

Federal agencies have imposed fines totaling $549 million on 11 major Wall Street banks for failing to back up the history of correspondence conducted through unauthorized messaging apps.

These institutions violated securities laws that mandate the preservation of communication records and the use of approved channels for conducting business transactions.

The US Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) jointly imposed fines on financial giants. Wells Fargo, which received the largest individual fine, was ordered to pay $200 million by both regulators.

Other major banks that faced penalties include BNP Paribas, SG Americas Securities, BMO Capital Markets, Mizuho Securities, Houlihan Lokey Capital, Moelis & Company, Wedbush Securities, and SMBC Nikko Securities America.

The violations involved the banks' use of "off-channel" messaging applications such as WhatsApp, iMessage, Signal, and text messaging to negotiate deals and other business matters. According to the SEC, the institutions failed to retain most of these off-channel messages, which violated federal securities laws.

Sanjay Wadhwa, Deputy Director of Enforcement at the SEC, emphasized the importance of recordkeeping and supervision requirements for effective regulatory oversight. Wadhwa stated, "Recordkeeping failures such as those here undermine our ability to exercise effective regulatory oversight, often at the expense of investors."

The penalties emphasize that the violations were not limited to entry-level or junior staff, but involved individuals at various levels of authority, including executives and senior managers. The SEC noted that such communication violations may have interfered with the investigation of various cases.