Regulators Announce Action Against Wells Fargo and Others for Evading Recordkeeping Laws

In separate announcements, The SEC and CFTC confirmed actions against Wells Fargo and ten other Wall Street companies. The charges allege that the companies failed to properly maintain records of their employees’ communications, as required by federal law. That evasion of recordkeeping laws led to fines of $549 million.

The action and settlement relate to employee use of secure message applications like WhatsApp and Signal. Regulators have been focused on reining in the use of those message apps for several years. According to officials, those apps can be used to evade recordkeeping laws, since companies may have no way to maintain records of those communications.

How secure apps defeat recordkeeping laws

U.S. law requires banks to record and maintain records of their communications. Wall Street companies often utilize record generation systems to meet these obligations. Unfortunately, secure apps exist outside of those systems. As a result, banks are unable to capture those messages for recordkeeping purposes.

Wells Fargo bore the brunt of the penalties, with a total assessment of $200 million. That includes a $125 million penalty from the Securities and Exchange Commission, as well as a $75 million penalty from the Commodity Futures Trading Commission. In its announcement, the CFTC noted:

“With today’s actions, the CFTC has now brought enforcement actions against 18 financial institutions, and imposed over $1 billion in penalties, for violations of the CFTC’s recordkeeping and supervision requirements involving the use of unapproved communication methods. The Commission’s message could not be more clear—recordkeeping and supervision requirements are fundamental, and registrants that fail to comply with these core regulatory obligations do so at their own peril.”

Other provisions of the orders

The actions levied against the firms include more than just financial assessments. Each of the companies was also ordered to stop violating recordkeeping laws. In addition, they are required to hire compliance consultants to review record retention policies.

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