CFTC Orders U.S. Bank to Pay $6 Million and Oppenheimer to Pay $1 Million for Recordkeeping and Supervision Failures

The Commodity Futures Trading Commission (CFTC) has taken action against U.S. Bank, N.A., and Oppenheimer & Co., Inc., holding them accountable for breaches in recordkeeping and supervision requirements. The CFTC issued orders against the two financial institutions, alleging their failure to maintain and preserve essential records and to diligently supervise matters related to their businesses as CFTC registrants.

The orders, which were simultaneously filed and settled, highlight a pattern of oversight failures by both U.S. Bank and Oppenheimer. The institutions have admitted to the facts outlined in the orders and are mandated to cease and desist from further violations. Additionally, they are required to comply with specific remedial undertakings.

According to the CFTC, U.S. Bank has been slapped with a $6 million civil monetary penalty, while Oppenheimer faces a $1 million penalty. These penalties underscore the seriousness with which regulatory bodies view violations of recordkeeping and supervision requirements.

The investigation revealed that from at least 2019 to the present, both U.S. Bank and Oppenheimer failed to prevent their employees, including senior staff members, from using unapproved communication methods. These methods included personal text messages, which were used for business-related communications. Such communications were supposed to be preserved as they related to the firms' CFTC-registered businesses. However, the necessary records were often not maintained or preserved by either institution, making it difficult for them to furnish these documents promptly upon request by the CFTC.

Furthermore, it was discovered that the widespread use of unapproved communication methods violated the internal policies and procedures of both firms. These policies explicitly prohibited business-related communication via unauthorized channels. Shockingly, even some supervisory personnel, responsible for ensuring compliance with these policies, were found to be engaging in business-related communications using unapproved methods, blatantly violating firm policy.

This enforcement action is part of a broader crackdown by the CFTC on financial institutions' use of unapproved communication methods. Since December 2021, the commission has imposed hefty civil monetary penalties totaling $1.124 billion on 22 financial institutions for similar violations of CFTC recordkeeping and supervision requirements.

In a related development, the U.S. Securities and Exchange Commission (SEC) has also taken action against an SEC-registered U.S. Bank affiliate and Oppenheimer, imposing civil monetary penalties for record keeping and supervision violations related to the use of unapproved communication methods.

The orders against U.S. Bank and Oppenheimer serve as a stark reminder to financial institutions of the importance of adhering to regulatory requirements, particularly regarding recordkeeping and supervision. The penalties imposed underscore the regulatory authorities' commitment to maintaining the integrity and transparency of the financial markets.

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