Wall Street sends regulators the emoji of the smiling poop

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1664363512 131029 1664363610 noticia normal.jpg

What is the best response to an uncomfortable and impractical rule? For Wall Street brokers, one option is simply to default. Eleven of the biggest names in finance have just paid $1.8 billion to the SEC, the United States Securities and Exchange Commission, and the Commodity Futures Trading Commission for the unauthorized use of platforms like WhatsApp by your employees. It manages to be as trivial as it is disturbing.

Stockbrokers such as Goldman Sachs and Morgan Stanley are required to preserve communications that touch on business matters, so that the records are available to regulators in the event of future investigations. This is made more difficult when employees are in the habit of using encrypted or hard-to-archive messaging services on their smartphones, which they do in part because they are in an industry that prizes speed. Add the complexity of working from home during a pandemic when electronic communications were paramount, and perhaps it’s no wonder that the rule became too difficult to follow rigidly.

But a rule is still a rule. The 11 companies, which also include Barclays, Credit Suisse and UBS, had a policy prohibiting the use of unapproved channels for business communication. In many of the companies, even the managers whose job it was to enforce those rules were breaking them abundantly. And not that the problem went unnoticed. The US Financial Industry Regulatory Authority already warned in 2019 that companies had problems controlling the digital communications of their staff.

All the firms have admitted their guilt, which is a victory for the control organisms. Still, the shame is widely spread. Bank of America’s $225 million fine represents less than 4% of its earnings last quarter. JP Morgan already took the slap in the face of disallowed messaging in December, and is now rolling out security-enhancing software on work phones. The SEC has given banks some regulatory flexibility for “participating” in its investigation, although it could stiffen its punishments if they don’t abide by the conditions it has imposed.

At least regulators haven’t said they’ve uncovered anything illegal, though apps with disappearing messages and encryption make it easy to hide evidence. But it remains worrying to find frequent and widespread examples of bank employees, many with “global company management” roles, routinely doing something their companies prohibit. It’s not about the offense itself, but about the shrug message it conveys.

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Brian Adam
Professional Blogger, V logger, traveler and explorer of new horizons.