financial institutions fined

Financial Institutions Fined for Discussing Deals and Trades Over Personal Apps

The government recently issued nearly $2 billion in fines against several large corporations. Several employees at some of the world’s largest financial institutions were found to have violated securities laws by using personal devices to communicate specialized financial transactions.

Although government regulators have always kept a watchful eye on a wide range of financial transactions as recent events show, they’re being even more proactive these days.

If you’re facing a fraud charge, a Georgia white collar crimes defense attorney with Griffin Durham Tanner & Clarkson LLC may be able to help. The stakes are high and you’re facing formidable opposition, so you’ll need an experienced legal team in order to have the best possible chance of achieving a positive outcome in your case.

Don’t wait to schedule your consultation – contact us online or call our office nearest you: (404) 891-9150 (Atlanta) or (912) 867-9140 (Savannah).

A “who’s who” of financial giants

The 16 firms involved in the regulatory action are some of the best-known financial services corporations:

  • Barclays Capital Inc.
  • Bank of America Securities, Inc. 
  •  Merrill Lynch
  • Pierce, Fenner & Smith Inc.
  • Cantor Fitzgerald & Co.
  • Citigroup Global Markets Inc.
  • Credit Suisse Securities (USA) LLC
  • Deutsche Bank Securities Inc. 
  • DWS Distributors Inc.
  • DWS Investment Management Americas, Inc.
  • Goldman Sachs & Co. LLC
  • Jefferies LLC
  • Morgan Stanley & Co. LLC 
  • Morgan Stanley Smith Barney LLC
  • Nomura Securities International, Inc.
  •  UBS Financial Services Inc.

Between January 2018 and September 2021, federal regulators found that employees of these firms not only communicated matters involving business with their colleagues, but also with their clients and third-party advisers using text messages and WhatsApp. 

The fines were levied because the employees failed to preserve most of their discussions, which violates federal laws that require many types of financial institutions to maintain records of business-related communications. Not only did many of these employees lose their jobs, their employers responded by creating stringent new measures to eliminate the unauthorized use of WhatsApp and other apps. 

Which rules were violated?

Several rules are established that address communications involving employees in the private financial sector, including the Financial Industry Regulatory Authority’s Rule Series 4510. This rule states that broker-dealers must preserve original copies of all business-related communications both sent and received. All communications sent using app-based messaging services or collaborative platforms must be preserved and supervised.

According to a Securities and Exchange Commission (SEC) release which announced the fines, the 16 firms cited violations of the Securities Exchange Act of 1934, which required firms to reasonably supervise communications. These firms failed to prevent and detect the violations. 

What employees did wrong

The Wall Street Journal reported that in many instances, supervisors not only knew of the unauthorized communications, but they also encouraged them. One trader reportedly deleted messages after he was told that regulators wanted those messages as part of their investigation. He later lied to investigators, saying that he had complied in full with all records requests. 

Actions by the SEC

The SEC announced the following firms had agreed to pay fines of $125 million:

  •  Barclays PLC
  • Bank of America
  • Citigroup
  • Credit Suisse Group AG
  • Deutsche Bank AG
  • Goldman Sachs
  • Morgan Stanley
  • UBS

Jefferies and Nomura agreed that they would each pay $50 million in fines, while Cantor Fitzgerald LP agreed to pay $10 million. 

Action by the Commodity Futures Trading Commission (CFTC)

In addition to the SEC fines, Bank of America paid an additional $100 million fine to the CFTC, and the following firms agreed to pay another $75 million:

  • Barclays
  • Citigroup
  • Credit Suisse
  • Deutsche Bank
  • Goldman Sachs
  • Morgan Stanley
  • UBS

Nomura paid a CFTC fine of $50 million, Jefferies paid $30 million, and Cantor Fitzgerald paid $6 million.

Facing charges of financial impropriety or fraud? Contact Griffin Durham Tanner & Clarkson LLC as soon as possible.

The Georgia white collar crimes defense attorneys with Griffin Durham Tanner & Clarkson LLC may be able to help if you are facing a fraud charge. Learn more by contacting us online or calling the office nearest you: (404) 891-9150 (Atlanta) or (912) 867-9140 (Savannah).

Areas we serve in Georgia