16 Wall Street companies fined over staff messages

16 financial companies, including Barclays, Bank of America, Citigroup, Credit Suisse, Goldman Sachs, Morgan Stanley and UBS, were fined Tuesday by U.S. regulators. The firms have to pay a total of $1.8 billion in fines after it turned out that employees discussed company business on personal mobile phones.

Last year, Reuters stepped up a wide-ranging investigation about off-channel communications of employees. The regulator also learned about the work-related communication through multiple lenders. This case is of the utmost importance to the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). 

According to agencies, from January 2018 through September 2021, bank employees used personal chats for discussing business matters with colleagues, clients and other third-parties. The topics included bond and stock transactions, etc. 

The above named companies did not preserve the majority of these off-channel communications. According to federal rules, brokers and other financial institutions must maintain robust record keeping processes. Agencies stated that it prevented them from  overseeing the functioning of financial markets, ensuring compliance with core rules, and gathering evidence in other probes.

Gurbir Grewal, director of the SEC's Division of Enforcement, said the case shows why choosing the right format for the storage of communications records was of high importance. 

Wall Street banks have struggled for years to restrict personal device use in the workplace. Financial institutions banned mobile phones from trading floors. However, when bankers and traders worked remotely during lockdowns, companies couldn’t track communication on employees’ personal cellphones. 

As reported by CFTC Commissioner Christy Goldsmith Romero, staff members used text messaging applications on their devices to avoid oversight. Senior executives were also involved. Although they were aware of violating recordkeeping provisions, their goal was to obfuscate trading communications. According to his statement, market participants have to keep in mind that the era of off-channel communications is over.