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September 28, 2022

Key Wall Street firms agree to pay $1.1bn to settle SEC probe

The US Securities and Exchange Commission (SEC) has confirmed that 16 major Wall Street firms have agreed to pay a combined penalty of $1.1bn over recordkeeping violations.     

The development follows a major inquiry taken up by the SEC last year to monitor if the Wall Street banks are keeping a tab on their employees’ work-related communications.   

In its latest statement, the SEC pointed to “widespread and longstanding failures by the firms and their employees to maintain and preserve electronic communications”.

As per the agency, between January 2018 and September 2021, the banks’ employees exchanged details regarding debt and equity deals with colleagues, clients and advisers through WhatsApp and other applications on their personal devices.

Employees at various levels of authority including supervisors and senior executives were reportedly involved in such practices.

The entities did not preserve business communications, violating federal rules.

According to the SEC, eight firms with five affiliates including Barclays Capital, Citigroup Global Markets, Credit Suisse Securities (USA), Goldman Sachs and Morgan Stanley have agreed to pay $125m each.

The firms also agreed to keep compliance consultants to hold reviews of their policies and procedures in connection to electronic communications.

Meanwhile, UBS Securities, Morgan Stanley and Citi said the banks have settled the issue, reported Reuter citing their spokespeople.

SEC Division of Enforcement director Gurbir S Grewal said: “Today’s actions – both in terms of the firms involved and the size of the penalties ordered – underscore the importance of recordkeeping requirements: they’re sacrosanct.

“If there are allegations of wrongdoing or misconduct, we must be able to examine a firm’s books and records to determine what happened.” Reuters, quoting Commodity Futures Trading Commission Commissioner Christy Goldsmith Romero, said: “Those choosing to participate in US financial markets are on notice: the era of evasive communications practices is over.”

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