Extract from Jim Gill’s article “Compliance Update: Unauthorized Messaging Apps Lead to 1.8B in Fines”
According to a recent press release from the Securities Exchange Commission (SEC), sixteen Wall Street firms were fined for widespread and longstanding failures by the organizations and their employees to maintain and preserve electronic communications.
In the years spanning 2018 to 2021, the firms’ employees routinely communicated about business matters using text messaging applications on their personal devices. The firms did not maintain or preserve the majority of these off-channel communications, violating federal securities laws.
Furthermore, the Commodity Futures Trading Commission (CFTC) found that traders were regularly using encrypted messaging apps like WhatsApp or ephemeral messaging apps like Signal, and then deleted communications “to avoid creating records and evade regulatory and bank oversight.”
Both agencies simultaneously brought cases against the firms, to send “a strong message to all that we regulate that we will not tolerate efforts to evade our regulatory oversight.” To drive that point home, $1.8 billion in fines were levied against companies out of compliance with the preservation of communications channels.
Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, 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.”
