What federal rules did the banks violate by not preserving chats?

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The Banks Violated Federal Recordkeeping Rules by Failing to Preserve Business Communications

Sixteen financial firms, including major institutions such as Bank of America, Citigroup, Goldman Sachs, and Morgan Stanley, collectively paid US$1.8 billion in fines for violating federal rules that mandate the preservation of business communications. This failure, which occurred between January 2018 and September 2021, involved employees communicating about debt and equity deals, as well as other business matters, using personal devices and applications like text messages and WhatsApp. The institutions did not retain the majority of these communications, thereby impeding regulatory oversight and evidence gathering.
Violation of Recordkeeping Requirements

The core violation stemmed from the firms' non-compliance with federal regulations requiring broker-dealers and other financial institutions to maintain records of business-related communications. Employees at multiple levels, from senior to junior investment bankers and traders across all 16 firms, routinely used personal applications to discuss business. The failure to preserve these digital conversations meant that a significant portion of business activities remained undocumented and inaccessible to regulators.
Impeded Regulatory Oversight and Investigations

The non-preservation of these business communications had a direct impact on the ability of agencies like the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) to perform their oversight functions. These records are crucial for ensuring compliance with market rules and for gathering evidence in various investigations. The inability to access these chats hindered the agencies' capacity to monitor financial markets effectively and to conduct thorough inquiries into potential misconduct.
Circumvention of Oversight Through Personal Devices

Evidence suggests that some employees deliberately used personal devices and applications to evade regulatory scrutiny. For instance, Bank of America staff were noted to use WhatsApp, with one trader explicitly stating, "We use WhatsApp all the time but we delete convos regularly." In other instances, senior executives reportedly directed staff to use these methods, and in one case, a Nomura trader deleted messages, including potentially incriminating statements, even after a document preservation request had been issued by the CFTC.

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What federal rules did the banks violate by not preserving chats?

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