The Securities and Exchange Commission delivered the lightest of slaps on the wrist to 16 Wall Street financial firms on Tuesday after “widespread and longstanding failures” to preserve employee communications like texts and WhatsApp messages — a clear violation of recordkeeping provisions in the Securities Exchange Act of 1934.
The SEC alleges that from January 2018 through September 2021 employees at America’s largest financial firms were routinely using private phones and messaging apps to conduct business, with little or no effort by their employers to retain the records.
“By failing to maintain and preserve required records relating to their businesses, the firms’ actions likely deprived the Commission of these off-channel communications in various Commission investigations,” the SEC said in a press release.
“The failings occurred across all of the 16 firms and involved employees at multiple levels of authority, including supervisors and senior executives,” the SEC continued.
Eight financial firms will pay just $US125 ($174) million each, two firms have agreed to pay $US50 ($69) million each, while another will pay just $US10 ($14) million, according to the SEC. The headline number that mainstream news outlets decided to run with was $US1.1 ($2) billion, though that’s obviously the total in aggregate and makes it sound more substantial than it really is.
Goldman Sachs, Barclays Capital, Citigroup, Morgan Stanley, and BofA Securities were among the firms that have agreed to pay $US125 ($174) million, essentially a rounding error for these companies. Goldman Sachs, as just one example, had $US59.3 ($82) billion in revenue last year.
“Finance, ultimately, depends on trust. By failing to honour their recordkeeping and books-and-records obligations, the market participants we have charged today have failed to maintain that trust,” SEC Chair Gary Gensler said in a press release that announced the ridiculously low penalties.
“Since the 1930s, such recordkeeping has been vital to preserve market integrity. As technology changes, it’s even more important that registrants appropriately conduct their communications about business matters within only official channels, and they must maintain and preserve those communications. As part of our examinations and enforcement work, we will continue to ensure compliance with these laws,” Gensler continued.
The press release from the SEC claimed that all the Wall Street firms, “agreed to retain compliance consultants,” to conduct reviews of recordkeeping for personal devices in the future, which is an astounding thing to read if you think about it. These enormous financial institutions simply didn’t have enough people making sure records were being kept? Was that the problem?
We’re sure whatever wrongdoing may have been missed in the SEC investigations that were hindered by poor recordkeeping will be remedied in the near future. After all, how can a little mum and pop operation like Goldman Sachs afford to pay $US125 ($174) million for years of malfeasance?