16 Wall Street giants including Goldman Sachs and Citigroup were fined a total of $1.1 billion for the long-term problem of communication record keeping

Image source: Visual China

Reporter | Feng Saiqi

On September 27, local time, the U.S. Securities and Exchange Commission (SEC) announced that it has imposed fines on 16 Wall Street financial institutions for “generally long-term failures in communication record keeping” by these financial institutions and their employees.

16 financial institutions were fined Source: SEC official website

SEC filings show that the fine is divided into three tiers: $125 million, $50 million, and $10 million. Among them, eight financial institutions including Barclays Capital, Bank of America, Citigroup, Credit Suisse Securities, Deutsche Bank, Goldman Sachs, Morgan Stanley, and UBS Securities are required to pay a fine of 125 million yuan. Five affiliates of the above-mentioned institutions were also named.

In addition, Nomura Securities and Jeffrey Group each pay a fine of $50 million; Cantor Fitzgerald is required to pay a fine of $10 million.

After investigation, from January 2018 to September 2021, employees of the above-mentioned financial institutions used electronic devices to discuss work, most of the communication channels were not reported to the regulatory authorities, and the communication records were not kept intact, “through unofficial channels, including senior officials. Employees, including investment bankers, exchanged tens of thousands of messages with colleagues and external parties in violation of U.S. federal securities laws.”

“This fine underscores the importance of record-keeping requirements, both in terms of the number of companies involved and the size of the penalties,” said Gurbir Grewal, the SEC ‘s director of enforcement.

In response to the SEC’s charges, 16 financial institutions admitted that they did violate the record-keeping provisions of the U.S. federal securities laws, agreed to pay combined fines of more than $1.1 billion, and have begun to improve their compliance strategies.

At the same time, the U.S. Commodity Futures Trading Commission (CFTC) also made similar charges against the above-mentioned financial institutions, imposing a total of more than $710 million in fines. The CFTC said the breaches were “well known within the bank, but no one stopped it” and that some companies ignored regulatory compliance policies, seriously threatening the regulator’s risk prevention and control requirements. At present, the CFTC has reached settlements with most companies.

In October 2021 , the SEC said it was investigating Wall Street financial institutions’ monitoring of employee communication records to ensure financial security and financial market stability.

To meet compliance requirements, many financial firms prohibit employees from using personal email, text messages and other social media channels to handle work. However, during the new crown epidemic, the requirements of remote work have greatly increased the frequency of employees using social media to communicate, and the update of communication software has put forward higher requirements on the monitoring system.

In December 2021 , regulators fined JPMorgan $200 million for allowing executives and employees to use instant messaging software and private mailboxes to discuss work . The SEC issued $125 million in fines and the CFTC issued $75 million in fines.