Another major bank/broker-dealer hit by SEC action

Paris-headquartered BNP Paribas has announced that it is under scrutiny by the Securities and Exchange Commission and the Commodity Futures Trading Commission for its personnel’s noncompliant use of communication tools, violating archiving protocols.

Although BNP Paribas reported better-than-expected figures for Q2, and would have beaten last year’s profit numbers without the charge linked to unspecified litigation, the planned litigation payments mean that the eurozone’s biggest bank by market value saw a 5% drop in net profit from last year.

The French financial institution and its broker-dealer subsidiary have initiated tentative agreements with the respective regulatory bodies to settle the investigations, according to the earnings disclosure published Thursday. These tentative agreements are awaiting approval from the CFTC and SEC.

Although BNP Paribas did not explicitly disclose what penalties it may have agreed, it has revealed that it has earmarked €125 million, approximately $137.3 million, for litigation expenses, as shown in the financial report.

The company’s representative chose not to provide any comments.

The SEC and CFTC have been inspecting the practices of BNP Paribas Securities Corp., the American registered securities trading arm of the bank, for its “adherence to record conservation regulations related to the utilization of unauthorized digital messaging systems for business correspondences,” as was revealed in the earnings statement.

Additionally, BNP Paribas SA, the bank’s parent company, has also attracted the attention of the CFTC for its digital record preservation practices.

BNP Paribas joins the list of global financial corporations held accountable for record-keeping norms. Off-record conversations — exchanges that occur outside the company’s approved communication avenues — have been a critical concern for financial industry regulators in recent years.

Last September, 11 of the biggest banking and brokerage firms globally agreed to pay a collective fine of $1.8 billion, admitting to noncompliance with rules that mandate the preservation of written correspondence.

SEC/CFTC fines so far for messaging:

BofA             $225m

Barclays                   $200m

Citigroup                 $200m

Credit Suisse           $200m

Deutsche Bank        $200m

Goldman Sachs       $200m

Morgan Stanley       $200m

UBS                         $200m

Nomura                  $100m

HSBC                      $75m

Jefferies                  $50m

Nomura Securities   $50m

Cantor Fitzgerald     $10m

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