BNY Mellon, Fifth Third and BlackRock are among the latest financial institutions to warn their investors that the Securities and Exchange Commission is investigating — or, at the very least, requesting information — regarding their practices amid the industrywide crackdown on personal-device misuse.
In its annual report Monday, BNY Mellon indicated it “has been responding to a request for information from the SEC concerning compliance with recordkeeping obligations relating to business communications transmitted on unapproved electronic communication platforms.”
The warning falls in line with similar notices Wells Fargo, HSBC and Societe Generale flagged this month, suggesting the next wave of settlements could be in the works.
The SEC and Commodity Futures Trading Commission fined 11 Wall Street banks and brokerages more than $1.8 billion in October for conducting some company business on messaging platforms such as WhatsApp. Penalties ranged from $16 million for Cantor Fitzgerald to $225 million for Bank of America. Most banks of BNY Mellon’s size paid $200 million.
“SEC Staff has stated that it is conducting similar inquiries into recordkeeping practices at other financial institutions,” BNY Mellon noted in its filing. “The Company is cooperating with the inquiry.”
Fifth Third, likewise, said in its annual report Friday that its “broker-dealer and investment advisory subsidiaries are cooperating with an investigation by the SEC regarding compliance with certain record-keeping requirements for business-related electronic communications on unapproved channels.”
The disclosure suggests the regulator is turning its attention to regional banks, and not merely focusing its efforts on Wall Street giants as before.
While noting the SEC has made similar requests at other financial institutions, Fifth Third said “any of these matters may result in material adverse consequences or reputational harm to the Bancorp, its affiliates and/or their respective directors, officers and other personnel, including adverse judgments, findings, settlements, fines, penalties, orders, injunctions or other actions.”
Asset manager BlackRock, in its annual report Friday, said it is cooperating with “requests from the SEC in connection with a publicly reported, industry-wide investigation of investment advisers’ compliance with record retention requirements relating to certain types of electronic communications.”
That may serve as confirmation of reports in October from Bloomberg and Reuters that the SEC is shifting its focus away from banks and toward asset managers.
“Management, after consultation with legal counsel, currently does not anticipate that the aggregate liability arising out of regulatory matters or lawsuits will have a material effect on BlackRock’s results of operations, financial position, or cash flows,” BlackRock said Friday, adding there’s no guarantee that wouldn’t change in the future. “Due to uncertainties surrounding the outcome of these matters, management cannot reasonably estimate the possible loss or range of loss that may arise from these matters.”
There’s no estimate, either, on the timeline for any consequences stemming from the record-keeping investigations. A handful of banks, such as Morgan Stanley, Bank of America and Jefferies told investors in last July and August that they were setting aside money to settle the investigations — two or three months before regulators announced the penalties. But HSBC, for example, flagged a communications-related CFTC probe in its annual report last year but wasn’t hit in the initial wave of settlements.
The bank’s CEO, Noel Quinn, said last week that HSBC is in the “final stages” of a deal with regulators over the misuse of messaging platforms.
“We’ve reached an agreement,” Quinn told Bloomberg. “We’ve not disclosed yet the final settlement.”
