Finance

Banks on Wall Street under scrutiny over staff communications

The US Securities and Exchange Commission is reportedly probing Wall Street banks to check whether they are complying with rules on tracking their employees’ communications.

Staff at Wall Street’s top watchdog have contacted several banks in recent weeks to make sure they are adequately monitoring work-related texts, calls and emails, three people familiar with the matter told Reuters.

The usage of personal devices has come under particular scrutiny, as the pandemic saw a surge in employees turning to private messaging apps to manage their workload remotely.

Regulators are reportedly concerned that such activity could make it harder to track wrongdoing such as insider trading or market abuse.

The SEC was contacted for comment.

READ Trader exodus from WhatsApp to Signal creates surveillance blind spot for City firms

Banks have previously been forced to reprimand and even fire staff for using popular encrypted messaging apps inappropriately, with some banning communication through the platforms.

Last year Morgan Stanley fired two employees for pre-pandemic misdemeanours relating to WhatsApp, while JPMorgan suspended a New York trader for using WhatsApp with colleagues.

Meanwhile, JPMorgan said in August that it had been dealing with regulatory inquiries regarding its compliance with rules on keeping records of electronic messages sent by staff on apps that the bank had not approved.

Some firms began trialing new technology this year to monitor employee conversations on WhatsApp, Signal and Telegram, amid a rush to such apps during the pandemic.

READ Banks rush to spy on traders’ Signal chats amid WhatsApp exodus

The SEC regularly conducts sweeps to make sure banks are living up to its rules and regulations, with widespread missteps sometimes leading to formal probes. It is not clear which banks have been contacted by the SEC to date, though the sweep has largely focused on one institution, the people familiar with the matter told Reuters.

Gurbir Grewal, the SEC’s enforcement chief, said earlier this month that the watchdog had come across poor record-keeping of staff messages on personal devices in multiple investigations.

“We continue to see in multiple investigations instances where one party or firm that used off-channel communications has preserved and produced them, while the other has not,” Grewal said. “Not only do these failures delay and obstruct investigations, they raise broader accountability, integrity and spoliation issues.”

To contact the author of this story with feedback or news, email Emily Nicolle

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