Big banks to pay nearly $2 billion for ‘widespread and chronic failures’ to protect text message records

About a dozen financial institutions have agreed to collectively pay more than $1.8 billion for failing to properly collect employee text messages for their records, the Securities and Exchange Commission and Commodity Futures Trading Commission announced Tuesday.

Eight banks are JP Morgan Chase and Co. They each agreed to pay $125 million in SEC fees for joining JPM.
He agreed to pay the same amount at the end of last year, establishing a record of fines related to record keeping at the time. Two other firms agreed to pay $50 million each, and one agreed to a $10 million penalty, adding up to more than $1.1 billion, the SEC said.

“Today’s actions — given the firms involved and the size of the fines ordered — underscore the importance of filing requirements — they are sacrosanct,” Gurbir Grewal, director of the SEC’s enforcement division, said in a statement. “If they are accused of wrongdoing or misconduct, we should be able to examine the books and records of the organization to find out what happened.”

In addition, the CFTC announced that the banks agreed to pay more than $700 million in fines to the regulator. In a statement, CFTC Commissioner Christine Johnson described the failures as “egregious and widespread,” according to the SEC’s statement of “widespread and long-standing failures by the companies and their employees to protect and secure electronic communications.”

“Increasing reliance on simple, accessible but unsanctioned chat and text platforms poses a significant challenge to the many types of entities operating in our markets,” Johnson said in a statement. “Internal compliance programs must adopt internal controls that align with this new landscape. Organizations must develop a culture of compliance at the enterprise level to reduce the risks associated with unauthorized use of chat and text platforms.”

According to the SEC, from January 2018 to September 2021, the banks failed to collect communications from employees’ personal devices and messaging apps that contained business matters across all levels of authority within their organizations. In addition to paying the fines, the banks “have begun implementing improvements to their policies and procedures to address these issues,” the SEC said.

The eight banks that joined JP Morgan in paying $125 million to the SEC were Barclays PLC BARC;
; Bank of America Corporation BAC,
with Merrill Lynch; Citigroup Inc. C,
; Credit Suisse Group AG CSGN,
; Deutsche Bank AG DBK
; Goldman Sachs Group Inc. GS
; Morgan Stanley M.S.
and UBS Group AG UBS,
Jefferies Financial Group Inc. Jeff,
and Nomura Holdings 8604;
+ 0.12%
It will pay $50 million, and Cantor Fitzgerald Inc. will pay $10 million.

All of them were charged with violating the SEC’s record keeping provisions and failing to properly manage them. The agency announced that the investigation is ongoing.

“Other broker-dealers and asset managers will be subject to similar requirements under federal securities laws to self-report and self-correct deficiencies,” Grewal said in a statement.

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