Wells Fargo Among 11 Firms Fined $549M Over Private Texting Apps

Wells Fargo Among 11 Firms Fined $549M Over Private Texting Apps

BMO, BNP Paribas also among those fined for not keeping records of texts.

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Reviewed by: Lisa Barr
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Edited by: Sean Allocca

The SEC and Commodity Futures Trading Commission fined 11 financial firms, including Wells Fargo and Bank of Montreal, a total of $549 million for not keeping records of work-related communications employees sent via private messaging apps. 

The Securities and Exchange Commission and the CFTC announced the fines Aug. 8, with the firms having admitted the findings in the orders. The SEC levied $289 million in fines against 11 institutions in their capacity as broker-dealers, while the CFTC fined the swap and futures businesses of four of those firms $260 million. Three of the companies are various branches of Wells Fargo Bank. 

All the charges have centered around the failure to record employee communications through private messaging apps, such as iMessage, WhatsApp and Signal. The SEC said the firms have “pervasive and longstanding ‘off-channel’ communications,” and that firms didn’t record or preserve “the substantial majority,” of the texts. 

For context, Wells Fargo’s most recent quarterly profits were $4.9 billion, meaning the $200 million in fines represents just under 5% of one quarter’s profits. 

 

Financial InstitutionSEC Fine ($M)Net CFTC Fine ($M)
Wells Fargo12575
BNP Paribas3575
Societe Generale3575
Bank of Montreal2535
Mizuho25N/A
Houlihan Lokey15N/A
Moelis & Co.10N/A
Wedbush10N/A
SMBC Nikko9N/A

 

The charges follow roughly $2 billion in charges the two regulatory bodies leveled at financial firms last September. The last round of charges included firms such as Citigroup, Morgan Stanley, Bank of America and Goldman Sachs. 

The firms were fined because the failures in recordkeeping involved “employees at multiple levels of authority, including supervisors and senior executives,” showing that the broad issues with compliance extended to the highest levels of the institutions.  

The firms also agreed to hire independent compliance consultants to review their recordkeeping policies. The SEC Division of Enforcement Director Gurbir Grewal said the firms fined Tuesday admitted their wrongdoing  

“We know that other SEC-regulated entities have committed similar violations, and so our work to enforce industry-wide compliance continues,” he said. “So here are three takeaways for those firms who haven’t yet done so: self-report, cooperate and remediate. If you adopt that playbook, you’ll have a better outcome than if you wait for us to come calling.”  

The ETF with the largest holding of Wells Fargo is the First Trust Nasdaq Bank ETF (FTXO), with an 8.6% allocation, which dropped 3.6% on the news Tuesday, but has since partially recovered. It is down 2.2% on the week at time of writing. 

 

Contact Gabe Alpert at [email protected]              

Gabe Alpert is a former data reporter at etf.com with over seven years’ experience in financial journalism. He also previously contributed reporting and analysis to Barron’s Magazine, Investopedia and other publications.