Fines for Wall Street Companies for Misusing Text Messages and WhatsApp Reach $2.5 Billion
Firms such as Wells Fargo & Co. and BNP Paribas SA will be facing substantial penalties amounting to hundreds of millions of dollars. This is due to their employees utilizing unofficial communication channels like WhatsApp, personal texts, or email for conducting business. This development is part of the ongoing efforts by US regulators to address Wall Street’s negligence in maintaining proper records.
Wells Fargo units agreed to pay $125 million to the Securities and Exchange Commission and BNP will pay $35 million, the regulator said Tuesday. The two lenders will pay $75 million each for respective violations by their derivatives brokers, the Commodity Futures Trading Commission said.
In all, the CFTC announced $266 million in fines, and the SEC said the companies had agreed to pay it $289 million. Fines from the investigation into communications practices now exceed $2.5 billion, making it one of the largest U.S. enforcement actions in the past decade.
What started out as looking at the use of chat apps for trading desks has expanded to look at all financial use of all kinds of communication tools that don’t keep records properly. Hedge funds and private equity are also being investigated for the use of personal messaging applications.
Wells Fargo spokeswoman Laurie Kight said in a statement that the company is pleased to resolve the matter. The BNP declined to comment.
Financial companies must monitor and accurately record communications related to their business to prevent inappropriate activity.
Studies Harder
Regulators say that using communication tools that automatically delete communications makes it much more difficult to investigate abuse.
Tuesday’s actions are the result of the cases published last September. At the time, the SEC announced $1.1 billion in fines against firms including Bank of America Corp., Citigroup Inc. and Goldman Sachs Group Inc., while the CFTC said the firms agreed to pay $710 million in fines. In May, HSBC Holdings Plc and Scotiabank settled their communications practices and paid fines of $45 million and $22.5 million, respectively.
On Tuesday, the SEC said its investigation “revealed extensive and prolonged out-of-channel communications.” As part of the settlements, the companies admitted that their employees had used platforms such as iMessage, WhatsApp and Signal to discuss business. According to the SEC, the companies did not keep adequate records. The CFTC said it had found similar violations.
Other prominent companies that agreed to the settlement on Tuesday included units of Bank of Montreal, Mizuho Financial Group and Societe Generale SA.
A BMO spokesman said the company had “made significant improvements to our compliance procedures in recent years” and was pleased to resolve the investigation. Mizuho, SocGen, Houlihan Lokey Inc., Moelis & Company LLC and SMBC Nikko declined to comment on the settlements announced Tuesday. A representative for Wedbush Securities Inc. did not respond to a request for comment.
