Federal Regulators Impose Hefty Fines on Financial Institutions for Recordkeeping Failures

In a resounding crackdown on non-compliance with recordkeeping requirements, federal regulators have imposed substantial fines totaling over $250 million on four major financial institutions. The Commodity Futures Trading Commission (CFTC) announced on Tuesday that Wells Fargo, BNP Paribas, Société Générale, and the Bank of Montreal face hefty penalties for their alleged failure to adhere to recordkeeping mandates associated with their use of unauthorized communication tools.

The CFTC’s Director of Enforcement, Ian McGinley, stated, “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 CFTC issued fines totaling $260 million, with Wells Fargo, BNP Paribas, and Société Générale each receiving $75 million penalties, and the Bank of Montreal facing a $35 million fine.

The regulatory actions stem from allegations that the financial institutions, along with their affiliated swap dealer and futures commission merchants (FCMs), permitted employees, including those in senior roles, to use unapproved communication methods such as personal text messaging and messaging apps like WhatsApp for business-related purposes over multiple years. These actions directly contradicted the firms’ internal policies and procedures, which explicitly prohibited the use of unauthorized communication platforms.

The CFTC’s investigation unveiled “widespread use of unapproved communication methods” that breached the companies’ internal compliance policies. Even supervisory personnel responsible for overseeing compliance allegedly engaged in similar violations, further undermining the firms’ commitment to regulatory compliance.

Financial institutions registered with the CFTC are mandated to maintain comprehensive records of written communications related to their business activities. The fines were imposed due to the inability of the penalized firms to adequately retain these records, rendering them incapable of promptly furnishing requested documents to the CFTC.

The actions by the CFTC parallel efforts by the Securities and Exchange Commission (SEC), which also levied fines against affiliates of the aforementioned financial institutions for failing to preserve electronic records. Wells Fargo Securities, along with its associated clearing services and financial advisers network, was fined a total of $125 million by the SEC. BNP Paribas Securities and SG Americas Securities received fines of $35 million each.

Other firms found to have committed similar violations, including BMO Capital Markets, Mizuho Securities USA, Moelis & Company, Wedbush Securities, and SMBC Nikko Securities America, also faced fines ranging from $9 million to $25 million by the SEC.

The SEC’s investigation revealed that “off-channel” communications were widespread and long-standing across all 11 firms. Employees were found to frequently use personal messaging platforms such as iMessage, WhatsApp, and Signal for business-related discussions, a practice that breached federal securities laws. These firms failed to maintain or preserve the majority of these communications, leading to their violations.

The series of fines underscores the seriousness with which regulatory bodies view recordkeeping and compliance obligations within the financial sector, sending a clear message that adherence to these core requirements is imperative.