Compliance deficiencies highlighted in $1.8B crackdown on messaging apps
In an enforcement sweep against off-channel electronic communications at financial institutions regulators warned was coming, 11 banks, investment firms, and their affiliates will pay a total of more than $1.8 billion in fines for “widespread and longstanding failures” in monitoring, maintaining, and preserving electronic communications by employees.
The Securities and Exchange Commission (SEC) fined the firms more than $1.1 billion total, while the Commodity Futures Trading Commission (CFTC) levied another $711 million in penalties Tuesday. The agencies concluded that, collectively, the firms did not reign in off-channel communications by employees from 2018-21.
Specifically, the two regulators found systemic use of off-channel electronic communications by company employees on business-related topics conducted on personal cell phones, messaging apps, and other channels. These messages were not captured, recorded, and stored by the firms, as required by the SEC’s and CFTC’s recordkeeping, books and records, and supervision requirements for market participants.