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Barclays' FINRA Fine Small Potatoes as Forex Investigation Looms

NEW YORK (TheStreet) -- The regulatory headaches continue for Barclays PLC (BCS), but the bank's latest fine is just a drop in the bucket, as it faces the possibility of another large set of fines as regulators' investigations of global banks' possible manipulation of foreign exchange markets proceeds.

The Financial Institutions Regulatory Authority (FINRA) late on Thursday announced it had fined the British bank $3.75 million -- yes, a tiny slap on the wrist -- for "for systemic failures to preserve electronic records and certain emails and instant messages in the manner required for a period of at least 10 years."

U.S. securities regulations and FINRA require companies to keep records in "non-rewritable, non-erasable format," which is also known as "Write-Once, Read Many," or by the unfortunate acronym, WORM.  These records make it much easier for regulators to investigate actions that have taken place over long periods, including the manipulation of the London Interbank Offered Rate (LIBOR) that Barclays admitted to in June 2012.

Barclays was the first of many big banks to settle multiple LIBOR investigations, with a large number of  European LIBOR settlements coming early this month. European regulators said Barclays had been granted immunity from EU fines, because of its cooperation in "revealing the existence of the cartel."  U.S. regulators continue to investigate LIBOR, and the banks involved are also facing multiple lawsuits, including claims brought by Fannie Mae (FNMA) and Freddie Mac (FMCC).

FINRA on Thursday also said that "from May 2007 to May 2010, Barclays failed to properly retain certain attachments to Bloomberg emails, and additionally failed to properly retain approximately 3.3 million Bloomberg instant messages from October 2008 to May 2010. In addition to violating FINRA, SEC and NASD rules and regulations, this adversely impacted Barclays' ability to respond to requests for electronic communications in regulatory and civil matters."

It sure does.  While some readers might think Barclays was being a bit "sloppy" in its record keeping, it seems more likely the company was being too careful.

Bloomberg is a crucial tool for most traders, not only for securities data, but for its instant messaging, chat room and email services that are used to facilitate a large volume of trades.  Bloomberg on Dec. 17 said its subscribers send more than 15 million instant messages through the company's terminals each day, along with 200 million emails.

With such a large volume of communications over the terminal, there's no way for any subscriber to make sure its employees never say anything incriminating through the Bloomberg terminals.  But Bloomberg this month announced it would provide a centralized set of compliance tools for subscribers.  Some banks, including UBS, have banned employees from participating in Bloomberg chat room discussions, while others, including Deutsche Bank (DB) and JPMorgan Chase (JPM) have been reported to be considering similar bans, or subjecting chat room messages to compliance approval.

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