The giants of the banking institutions are expected to settle with the US Securities and Exchange Commission and the Commodity and Futures Trading Commission related to the agencies’ investigation into the use of banned private messaging apps like Whatsapp by the banks’ traders. According to people familiar with the matter, the total settlement could possibly reach over US$1 billion.
The regulatory bodies are presumed to announce the settlement deals with the banks by the end of the government’s fiscal year on September 30, when annual enforcement statistics are usually disclosed. According to the people mentioned, the list of banks that are poised to pay US$200 million each includes Bank of America, Barclays, Citigroup, Deutsche Bank AG, Goldman Sachs Group, Morgan Stanley, and UBS Group AG. Jefferies Financial Group and Nomura Holdings are also about to agree on their respective lower settlements reflecting their size.
The amounts are patterned after the settlement deal between JP Morgan Chase and the agencies in December 2021, when the former was identified to have failed to retain tens of thousands of messages between traders and clients. The bank paid US$200 million in total settlement–US$125 million to the SEC and US$75 million to the CFTC.
According to the regulatory bodies’ rules, brokers and banks with brokerage arms are supposed to keep a paper trail of their employees’ communications for regular checking of compliance with investor protection laws. The use of encrypted and private messaging apps like Whatsapp and Signal makes the conversations prone to being deleted.
Conducting brokerage business over messaging apps–which became more prevalent when remote work started during the pandemic–could also possibly extend the banks’ business to its employees’ personal devices. This potentially increases the risk of being hacked and sensitive data being stolen.
The settlement deals, if realized at this level, could be a record for the government. In 2020, during the former administration’s last year, the median settlement cost was around US$194,000.
Information for this briefing was found via The Wall Street Journal. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.