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With the ongoing banking crisis in the United States, financial regulators continue to scrutinize large traditional financial companies such as HSBC and Scotiabank.
The Securities and Exchange Commission (SEC) charged HSBC’s securities division HSBC Securities (HSI) and Scotiabank’s investment subsidiary Scotia Capital with fines for record-keeping violations.
HSI agreed to pay $15 million to settle with the SEC and Scotia Capital agreed to pay $7.5 million. In addition, Scotia paid $15 million to settle the costs of the US Commodity Futures Trading Commission.
Announcing the news on May 11, the US Securities and Exchange Commission said banks had failed to comply with record keeping requirements for dealers registered with US market regulators.
Authorities have learned that HSBC and Scotiabank employees, including senior staff, have used unauthorized communication channels such as text messages and WhatsApp. SEC writes:
“Managing directors and senior executives responsible for supervising junior employees themselves have failed to comply with firm policy by reporting, using non-firm approved methods on their personal devices, the firm’s broker-dealer activities.”
According to the regulator, HSI’s failure to implement a policy prohibiting such communications resulted in its failure to reasonably supervise its employees in accordance with section 15(b)(4)(E) of the Exchange Act.
“None of the firms maintained or retained a significant portion of these communications in violation of federal securities laws,” the SEC noted.
Related: UK Banks Denying Cryptocurrency to Customers: Report
HSBC and Scotiabank are just the latest Wall Street firms to face fines for employees using personal devices and messaging apps. In September 2022, U.S. authorities reportedly imposed nearly $2 billion in fines in such cases, penalizing firms for talking about deals, deals, and personal applications. In 2021, US regulators launched a wide-ranging investigation into the use of personal messengers like WhatsApp by financial companies.
Both HSBC and Scotiabank can hardly be called very cryptocurrency-friendly banks.
In March 2023, HSBC Holdings banned credit card purchases of cryptocurrencies for retail customers, joining a growing list of banks that have tightened restrictions on digital assets. In 2021, HSBC Group CEO Noel Quinn wrote an op-ed against cryptocurrencies and stablecoins while supporting central bank digital currencies.
While Scotiabank reportedly allows transactions from cryptocurrency exchanges, the firm is also notorious for banning users from buying cryptocurrencies. Some online users reported issues withdrawing or depositing Bitcoin (BTC) using their Scotia accounts in July 2022.
