Financial regulators continue to scrutinize major traditional financial firms such as HSBC and Scotiabank amid the ongoing banking crisis in the United States.
The US Securities and Exchange Commission (SEC) has penalized HSBC Securities (HSI), the securities arm of HSBC, and Scotia Capital, the investment subsidiary of Scotiabank, for record violations. HSI agreed to pay $15 million to settle with the SEC, while Scotia Capital agreed to pay $7.5 million. Scotia also paid $15 million to settle the CFTC charges.
In announcing the news on May 11, the SEC said the banks had failed to meet record-keeping requirements for dealers registered with the US market regulator. Authorities learned that HSBC and Scotiabank employees - including senior staff - were using unauthorized communication channels such as text messages and WhatsApp. The SEC wrote: "Managing directors and senior executives who oversee junior employees themselves failed to comply with company policy by using non-company-approved methods on their personal devices to communicate about the company's broker-de aler business."
According to the regulator, HSI's failure to implement a policy prohibiting such communications resulted in its failure to reasonably supervise its employees pursued to Section 15(b)(4)(E) of the Exchange Act.
"Neither company maintained or preserved substantially all of these communications, in violation of the federal securities laws," the SEC noted. HSBC and Scotiabank are the latest Wall Street firms to face fines for employees using personal devices and messaging apps .In September 2022, US authorities reportedly slapped nearly $2 billion in fines in such cases, punishing companies that talk about transactions and transactions, as well as personal apps. US regulators launched a wide-ranging investigation into financial firms using personal messengers such as WhatsApp in 2021.
HSBC and Scotiabank are unlikely to be known as very crypto-friendly banks. In March 2023, HSBC banned retail customers from buying cryptocurrencies with credit cards, joining a growing number of banks tightening restrictions on digital assets. In 2021, HSBC Group CEO Noel Quinn published an article against cryptocurrencies and stablecoins and in favor of central bank digital currencies. While Scotiabank reportedly allows cryptocurrency exchanges to trade, the company is also known for banning users from buying cryptocurrencies. Some Online Users Reported Problems Withdrawing or Depositing Bitcoin, July 2022 using their Scotia accounts.
