In brief: Federal regulators have been busting Wall Street firms with hefty fines for using messaging apps instead of email when conducting official business. It's not that texting is specifically not allowed. The problem is that many text messaging apps lack a method of backing up communication histories, which these companies are required to do.

On Wednesday, the SEC and the Commodity Futures Trading Commission (CFTC) announced they had charged 11 Wall Street firms for recordkeeping violations, with fines collectively totaling over half a billion dollars. The companies admitted fault in using apps like Signal, WhatsApp, and Message (formerly iMessage) in daily business communications.

Federal securities laws require banks and investment companies to save communications histories and ensure that all employees conduct business through "authorized channels" that retain the information exchanged. The SEC considers unrecorded comms, particularly encrypted messaging, "off-channel" communication, which is prohibited for business-related affairs.

"The firms did not maintain or preserve the substantial majority of these off-channel communications, in violation of the federal securities laws," the SEC stated in its press release.

All totaled, the fines amounted to $549 million, with Wells Fargo and its affiliated firms hit the hardest seeing fines totaling $200 million – $125 million from the SEC and $75 million from the CFTC. Other businesses charged include:

• BNP Paribas ($110 million)
• Société Générale ($75 million)
• Bank of Montreal ($35 million)
• SG Americas Securities ($35 million)
• BMO Capital Markets ($25 million)
• Mizuho Securities ($25 million)
• Houlihan Lokey Capital ($15 million)
• Moelis & Company ($10 million)
• Wedbush Securities ($10 million)
• SMBC Nikko Securities America ($9 million)

"Recordkeeping failures such as those here undermine our ability to exercise effective regulatory oversight, often at the expense of investors," said SEC Deputy Director of Enforcement Sanjay Wadhwa.

The admitted violations date back to 2019 and mainly involve employees, including managers and executives who should know better, using random messaging apps on their personal phones to talk business. Regulators did not indicate that any of the firms committed or were under investigation for other crimes. The fines appear to be more of a reminder that these businesses need to be mindful of their company cultures and not get lackadaisical in their recordkeeping.

The primary reason for institutions like banks and security exchanges to preserve their comms is to ensure regulators have access to all relevant emails and conversations regarding matters under investigation. If companies hide information, even unintentionally, it could hinder bodies like the SEC and CFTC from holding companies accountable for more severe crimes like fraud and money laundering. The recent fall of FTX and Sam Bankman-Fried is a prime example of why these rules exist.