Sixteen financial firms, including Barclays, UBS, Goldman Sachs, and Citigroup, are being fined a combined $1.8 billion by the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC).
Communications and record-keeping probes by the two state agencies found that, between January 2018 and September 2021, bank workers routinely texted or WhatsApp-messaged about business matters with colleagues and clients on their personal devices without properly logging the chats. The phenomenon especially caught on as professionals worked from home during the pandemic.
As convenient as it may be, it is illegal.
Federal law mandates that banks keep records of communication between clients and brokers. Private exchanges fall outside official channels and are harder for regulators to monitor. Plus, the risk of hackers stealing confidential information also increases on personal devices.
A hefty price to pay
Quotable
“It’s time for Wall Street to stop waiting for an enforcement action before it changes its practices. Tone at the top must change on Wall Street. Change can only happen if the banks’ C-suite establishes a culture of compliance over evasion.” –CFTC Commissioner Christy Goldsmith Romero
A top-down problem
Those found guilty of sending and receiving thousands of messages to and from dozens of clients and colleagues weren’t exactly bottom-of-the-rung employees. Several managing directors and heads of trading desks were explicitly called out in the investigation.
For instance, at Bank of America—which paid the most in penalties—a head of a trading desk not only told his juniors to delete messages, but also urged them to switch to the more secretive Signal while the CFTC’s investigation was underway.
Making amends
JPMorgan was the first bank to settle the probe. Last December, the New York-headquartered banking giant agreed to foot $125 million in fines over illegal texting and emailing among employees.
Earlier in 2020, JPMorgan first suspended and then fired 20-year veteran credit trader Edward Koo for creating a WhatsApp group to chat about business-related things. Around a dozen brokers at the firm saw their bonuses slashed for not adhering to formal communication channels.
Other banks, including Morgan Stanley, HSBC, and Credit Suisse, have also ousted senior officials for violating communication rules.
Now hiring: WhatsApp cop
Several banks including Bank of America, Citigroup, Goldman Sachs, and Morgan Stanley, have each vowed to employ a “WhatsApp cop” of sorts.
This role will be filled by a compliance consultant who will review how the firms “monitor and archive any work-related communications, including on employees’ mobile phones or other personal devices,” Bloomberg reported.
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