Big fines expected in Wall Street text probe
U.S. regulators are poised to announce a settlement of about $2 billion with firms across Wall Street for failing to monitor employees using unauthorized messaging apps.
The Securities and Exchange Commission and the Commodity Futures Trading Commission are preparing to disclose the results of the investigation as soon as Wednesday, according to people with knowledge of the matter. The penalties are poised to be the largest of their kind, with the total fines described by a person with knowledge of the matter and disclosures made by the world’s largest banks.
Representatives for the SEC and CFTC declined to comment.
The action represents a rare escalation from regulators looking into such an issue, with fines tending to be significantly lower in the past. The sweeping civil probes rank among the largestever penalties levied against U. S. banks for record- keeping lapses, dwarfing a $15 million penalty imposed on Morgan Stanley in 2006 over its failure to preserve emails.
Morgan Stanley said in July it was nearing a settlement that would see it pay a $200 million fine — a figure that was likely to be mirrored by its biggest rivals. Other major banks also disclosed setting aside similar figures at the end of their second- quarter earnings without specifying the reason.
JPMorgan Chase & Co. has been the only bank until now to reach a settlement with the regulators and was the first to report the fines in December. Even managing directors and other senior supervisors at the largest U.S. bank had skirted regulatory scrutiny by using services such as WhatsApp or personal email addresses for work-related communication, regulators said at the time.
Finance firms are required to scrupulously monitor communications involving their business to head off improper conduct. That system, already challenged by the proliferation of mobilemessaging apps, was strained further as firms sent workers home shortly after the start of the COVID19 outbreak.
In recent months, Citigroup Inc., Bank of America Corp., Goldman Sachs Group Inc., Morgan Stanley, Barclays Plc, Deutsche Bank AG and Credit Suisse Group AG have set aside similar amounts to resolve the probes, according to public disclosures and people familiar with the matter.
Smaller banks have said they’re expecting to pay less, with Jefferies Financial Group Inc. anticipating $80 million in civil penalties. HSBC Holdings Plc has disclosed it’s under investigation for bankers’ use of unauthorized messaging channels but has yet to announce any provisions for a settlement.
When JPMorgan’s fine was disclosed, Sanjay Wadhwa, deputy director of enforcement at the SEC, said that the New York-based bank’s “failures hindered several commission investigations and required the staff to take additional steps that should not have been necessary.” Firms should “share the mission of investor protection rather than inhibit it,” he said.