The Commodity Futures Trading Commission (CFTC) announced on Tuesday that it had issued orders that would both file and settle charges against certain affiliates of 11 separate financial institutions. The charges alleged that the affiliates had failed to maintain, keep, or produce records that the Commission requires to be kept. Further, the affiliates purportedly did not adequately supervise matters related to their business with the financial institutions.
The affiliates mentioned in the CFTC’s announcement include Bank of America, Barclays, Cantor Fitzgerald, Citi, Credit Suisse, Deutsche Bank, Goldman Sachs, Jefferies, Morgan Stanley, Nomura, and UBS. These companies will be required by the settlement to “cease and desist from further violations of recordkeeping and supervision requirements, and are ordered to engage in specified remedial undertakings.”
The Commission requires that each of the aforementioned companies stop its employees from using unapproved communication methods, track written communications between employees, and more. When the CFTC requested records of the companies fulfilling their duties, they were unable to provide them.
The Commission’s chairman, Rostin Behnam, said of the settlements, “The Commission’s recordkeeping and supervision requirements ensure the safety and integrity of the U.S. derivatives markets and protect customers and market participants. As demonstrated today, the Commission will vigorously pursue registrants who fail to comply with their core regulatory obligations and hold them accountable.”
Similarly, the Securities and Exchange Commission announced on Tuesday separate charges they had brought against 16 Wall Street firms for their alleged failures to keep adequate records. These firms include Barclays, Goldman Sachs, Morgan Stanley, UBS, and more. The firms admitted the facts the SEC had alleged against them regarding their “widespread and longstanding failures… to maintain and preserve electronic communications.”
Combined, the SEC settlements total more than $1.1 billion. The SEC investigation into the firms revealed a significant number of off-channel communications between investment bankers, debt and equity traders, and more. The firms violated several federal securities laws in failing to regulate, maintain, or preserve these off-channel communications.
Just as in the CFTC case, the firms at the center of the SEC charges will be required to pay civil penalties as well as ensure that recordkeeping provisions are maintained more effectively in the future. The firms will also be required to hire compliance consultants who will continually monitor the individual policies and procedures a firm sets on their off-channel communications.
