Regulators charge Big Six bank units over years-long unapproved use of personal text, WhatsApp
Units of Scotiabank in the U.S. have been hit with multimillion-dollar penalties by regulators over recordkeeping violations through use of unapproved communication methods for business conversations.
In a statement today, the U.S. Securities and Exchange Commission (SEC) announced that Scotia Capital USA has agreed to pay a $7.5-million penalty for “widespread and longstanding failures by … employees to maintain and preserve electronic communications.”
The Commodity Futures Trading Commission separately announced charges against the Bank of Nova Scotia and Scotia Capital USA saying that they “[failed] to maintain, preserve, or produce records that were required to be kept under CFTC recordkeeping requirements, and failing to diligently supervise matters related to their businesses as CFTC registrants.” The CFTC has ordered BNS to pay a $15-million penalty.
According to the regulators, the firms admitted their employees for years often communicated “off-channel” about business matters, including through messages sent via personal text and WhatsApp.
“[W]idespread use of unapproved communication methods violated BNS’s own policies and procedures, which generally prohibited business-related communication taking place via unapproved methods,” the CFTC said. “Further, some of the very same supervisory personnel responsible for ensuring compliance with the firms’ policies and procedures themselves used non-approved methods of communication to engage in business-related communications, in violation of firm policy.”
Investigators at the SEC found “pervasive and longstanding use of off-channel communications” at Scotia Capital.
The SEC also laid out similar charges against HSBC Securities USA, a unit of HSBC in the US, which has agreed to pay $15 million in penalties.
The use of personal devices has been a point of growing concern for regulators in the U.S., as failure to ensure proper records are maintained can get in the way of oversight and investigations.
