Closeup of mallet being hit on stacked coins at table in courtroom

Brokers texting on personal devices and other misconduct is costing Wall Street firms over US$1 billion to resolve allegations that the activity breached federal securities laws.

The U.S. Securities and Exchange Commission (SEC) settled charges against eight major brokerage firms that are each paying US$125 million to resolve the allegations of violating federal securities laws by failing to preserve electronic communications.

The firms are Barclays Capital Inc., BofA Securities Inc., Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., Goldman Sachs & Co. LLC, Morgan Stanley & Co. LLC and UBS Securities LLC.

Two additional firms — Jefferies LLC and Nomura Securities International, Inc. — each agreed to pay US$50 million penalties, and Cantor Fitzgerald & Co. agreed to a US$10 million penalty to resolve similar charges.

The settlements stem from an SEC investigation that found widespread use communications on personal devices that were not captured by the firms, including messaging among senior and junior investment bankers and debt and equity traders.

“The firms did not maintain or preserve the substantial majority of these off-channel communications, in violation of the federal securities laws,” the SEC said in a release, noting that this prevented regulators from having access to these communications as part of its compliance and enforcement work.

In addition to paying the sanctions, the firms have begun implementing measures to prevent future violations.

Separately, the U.S. Commodity Futures Trading Commission announced settlements for related conduct, the SEC reported.

“Finance, ultimately, depends on trust. By failing to honor their recordkeeping and books-and-records obligations, the market participants we have charged today have failed to maintain that trust,” said SEC chair Gary Gensler, in a release.

“Since the 1930s, such recordkeeping has been vital to preserve market integrity. As technology changes, it’s even more important that registrants appropriately conduct their communications about business matters within only official channels, and they must maintain and preserve those communications.”