© Reuters. FILE PHOTO: The seal of the U.S. Securities and Exchange Commission (SEC) is seen at their headquarters in Washington, D.C., U.S., May 12, 2021. REUTERS/Andrew Kelly/File Photo
By Chris Prentice
WASHINGTON (Reuters) -U.S. regulators on Thursday slapped units of Bank of Nova Scotia and HSBC Holdings Plc (LON:) with civil penalties for widespread recordkeeping violations through employees’ use of personal devices and apps for work communications.
The banks admitted they had failed to meet recordkeeping requirements for dealers registered with U.S. market regulators.
HSBC Securities Inc agreed to pay $15 million to settle U.S. Securities and Exchange Commission (SEC) charges. Scotia Capital agreed to pay $22.5 million in total: $15 million to settle U.S. Commodity Futures Trading Commission charges and $7.5 million to resolve SEC charges.
HSBC and Scotiabank are the latest Wall Street companies to face penalties for employees’ use of personal devices and messaging apps since regulators launched a broad probe into use of such platforms in 2021. More than a dozen banks agreed to pay a total of $1.8 billion for such violations in September.
“In recent years, we have made significant investments in enhancing our compliance procedures and have worked diligently to maintain the highest standards for professional conduct throughout our organization,” an HSBC spokesperson said.
A Scotiabank spokesperson said, “We are committed to conducting our business according to the most current high standards of business conduct and adhering to all regulatory requirements, including the use of approved communication channels for business purposes.”
During its investigation, CFTC learned Scotiabank employees, including senior staff, were using off-channel communications such as text messages and WhatsApp, according to the agency’s order.
SEC investigators uncovered “pervasive and longstanding use of off-channel communications” at both companies. Both banks notified SEC’s enforcement staff of the issues and had begun to remediate them, the agency said in its order.
Brokers, swaps dealers and investment advisers registered with the agencies have recordkeeping requirements. Regulators have grown increasingly concerned about dealers’ use of personal devices, saying that failure to maintain records can thwart oversight and investigations into potential wrongdoing.
Read the full article here
