SEC charges big banks with doing business through messaging apps without keeping records

Aug. 8 (UPI) -- Wells Fargo will pay the bulk of $289 million in penalties for record-keeping violations stemming from the employee use of messaging platforms such as WhatsApp, the Securities and Exchange Commission said Tuesday.

Wells Fargo and BNP Paribas are among 10 companies that agreed to charges related to "widespread and longstanding failures" related to unofficial communications used for official business.

Wells Fargo agreed to the bulk of the penalties, agreeing to pay $125 million. BNP is a distant second with a $35 million penalty.

The firms, the SEC said, admitted to the charges, acknowledging that using messaging apps was in violation of federal securities law.

Gurbir Grewal, the director of the enforcement division at the SEC, said compliance is an essential tool for investor protection, with the agency ordering $1.5 million in penalties to date to "drive this foundational message home."

"And while some broker-dealers and investment advisers have heeded this message, self-reported violations, or improved internal policies and procedures, today's actions remind us that many still have not," he added.

The SEC said the use of "off-channel" communications was pervasive, with firms admitting to the use of messaging platforms on personal devices since at least 2019.

"The firms did not maintain or preserve the substantial majority of these off-channel communications, in violation of the federal securities laws," the SEC explained.

The firms are charged with violating the record-keeping provisions of the Securities Exchange Act of 1934. Apart from the penalties, the firms agreed to take on independent consultants to review the practice of retaining records of electronic communication.

Wells Fargo already this year agreed to pay $1 billion to settle a class-action lawsuit for overstating its progress related to a fake accounts scandal nearly a decade ago.

The plaintiffs claimed Wells Fargo executives misled investors by saying regulators were satisfied with the bank's progress under federal consent orders. But a House Financial Services Committee report in March of 2020 found that Wells Fargo was not in compliance.