Raphael Stevens

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    Hanesbrands faces pressure from activist Barington Capital Group, which wants to see costs and debt cut

    Activist investment firm Barington Capital Group is calling on Hanesbrands to reduce its costs, generate cash and perhaps select a new CEO as it grapples with a shrinking market cap.
    Hanesbrands, which is known for its line of basic T-shirts, underwear and bras, defended its strategy but said it is “open-minded” about changes.
    Shares of Hanesbrands have fallen about 17% year to date.

    A customer at a Target store in Chicago, Illinois shops for Hanes underwear
    Tannen Maury | Bloomberg | Getty Images

    Activist investment firm Barington Capital Group is pressuring Hanesbrands to reduce its costs, generate cash and perhaps pick a new CEO as the apparel maker’s market cap shrinks, the firm announced Tuesday.
    In a Monday letter to Hanesbrands Chairman Ronald Nelson, Barington’s CEO, James Mitarotonda, outlined the issues facing the company and called for a series of changes.

    “We believe that Hanesbrands currently sits at a critical juncture and must immediately focus on cash generation and debt reduction in order to create long-term value for shareholders,” he wrote. 
    “We believe that management’s largely ineffective response to recent market challenges is responsible for the Company’s rapidly deteriorating results,” Mitarotonda added. “Further, Hanesbrands’ excessive debt burden appears to amplify the impact of poor operating performance on Hanesbrands’ ability to create value for shareholders.”
    Hanesbrands, which is known for its line of basic T-shirts, bras and underwear, has seen its stock plummet about 17% this year. It has grappled with soft sales and plunging profits as wholesalers pull back on ordering.
    The company’s shares closed 5% higher on Tuesday.
    Barington wants to see Hanesbrands reduce selling, general and administrative expenses by at least $300 million per year and use the savings to pay down debt. It also wants the company to improve its inventory practices.

    Further, Barington believes Hanesbrands needs new board members with “more relevant skills and experience,” and perhaps a new CEO, to turn its business around, the letter said. 
    “We believe that the right board and management team and an immediate focus on cash generation and debt reduction can position Hanesbrands to become a best-in-class, vertically integrated apparel company and achieve durable profitable growth,” Mitarotonda wrote. 
    In response, Hanesbrands, which is due to report earnings on Thursday, said it stands by its current growth plans but is “open-minded with regard to additional paths to improve performance and create value.” 
    It also appeared resistant to any changes to its board.
    “HanesBrands’ Board actively oversees the development and execution of our strategy, operations and capital allocation decisions, in collaboration with the management team. The Board and management team are deeply experienced in areas relevant to our strategy and portfolio,” the company said in a press release. 
    “Further, the Board is committed to ongoing refreshment and having the right mix of expertise and diversity, as demonstrated by the addition of three independent directors to our Board over the last four years,” Hanesbrands said.
    It’s not clear how large Barington’s stake in Hanesbrands is, and whether it will try to nominate any board members.  More

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    Goldman Sachs says chief of staff John Rogers to step back from longtime role

    John Rogers, who joined Goldman Sachs in 1994 and served as chief of staff to four of the bank’s CEOs, is giving up that role next month, CEO David Solomon said Tuesday in an employee memo.
    For decades, Rogers wielded outsized influence at Goldman.
    While Rogers is ceding his chief of staff responsibilities to Russell Horwitz, a former deputy of his who was most recently global affairs chief of Citadel, he is retaining other roles.

    John Rogers speaks during an interview at the Securities Industry and Financial Markets Association annual meeting in Washington, D.C., Oct. 24, 2017.
    Andrew Harrer | Bloomberg | Getty Images

    A key Goldman Sachs executive known as a power broker internally and in political circles is stepping back from some of his responsibilities, according to a memo Tuesday from CEO David Solomon.
    John Rogers, who joined Goldman in 1994 and served as chief of staff to four of the bank’s CEOs, is giving up that role next month, Solomon said in the employee memo.

    For decades, Rogers, 67, wielded outsized influence at Goldman, an institution sometimes called “Government Sachs” because former executives have gone on to presidential administration roles. In fact, Rogers helped former CEO Hank Paulson become Treasury secretary in 2006, according to The New York Times, which first reported Rogers’ announcement.
    While Rogers is ceding his chief of staff responsibilities to Russell Horwitz, a former deputy of his who was most recently global affairs chief of Citadel, he is retaining other roles. Rogers remains a management committee member, chairman of several philanthropic efforts and involved in regulatory and corporate governance projects, Solomon said.
    As incoming chief of staff, Horwitz, who spent 16 years at Goldman before departing in 2020, will oversee corporate communications and government and regulatory affairs. Horwitz is rejoining Goldman at the coveted partner rank. He will also be a management committee member reporting to Solomon.
    “Please join me in thanking John for his long and impactful tenure as chief of staff, as well as his continued commitment to Goldman Sachs in his other firmwide responsibilities, and in welcoming Russell back to Goldman Sachs,” Solomon said.
    The move comes at a key time for Goldman’s CEO. Solomon has endured criticism from some partners and investors over an ill-fated consumer banking effort, his high-profile DJ hobby and other missteps. More

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    How America is failing to break up with China

    WHEN IT COMES to tracing the geography of global supply chains, few companies provide a better map than Foxconn, the world’s largest contract manufacturer. This year the Taiwanese giant has built or expanded factories in India, Mexico, Thailand and Vietnam. The Chinese production sites once beloved by Western companies are firmly out of fashion. Souring relations between the governments in Washington and Beijing have made businesses increasingly fretful about geopolitical risks. As a consequence, in the first half of the year, Mexico and Canada traded more with America than China for the first time in almost two decades. The map of global trade is being redrawn.At first glance, this is almost exactly what is desired by America’s policymakers. Under first Donald Trump and then Joe Biden, officials have put in place an astonishing array of tariffs, rules and subsidies—an executive order introducing outbound investment screening, the latest sally, is expected soon. The aim is to weaken China’s grip on sensitive industries and, in a motivation that mostly goes unspoken, prepare for a possible invasion of Taiwan. This attempt to “de-risk” trade with China is the cornerstone of the White House’s foreign policy. Yet despite extensive efforts, and the reshaping of trade seemingly evident in headline statistics, much of the apparent de-risking is not what it appears.Instead of being slashed, trade links between America and China are enduring—just in more tangled forms. The American government’s preferred trading partners include countries such as India, Mexico, Taiwan and Vietnam, in which it hopes to spur the “friendshoring” of production to replace imports that previously would have come from China. And trade with these allies is rising fast: just 51% American imports from “low-cost” Asian countries came from China last year, down from 66% when the Trump administration’s first tariffs were introduced five years ago, according to Kearney, a consultancy. The problem is that trade between America’s allies and China is also rising, suggesting that they are often acting as packaging hubs for what, in effect, remain Chinese goods. This flow of products means that, although America may not be buying as much directly from China as before, the two countries’ economies still rely on each other.For evidence, look at the countries that benefit from reduced direct Chinese trade with America. Research by Caroline Freund of the University of California, San Diego and co-authors investigates this dynamic. It finds that countries which had the strongest trade relationships with China in a given industry have been the greatest beneficiaries of the redirection of trade, suggesting that deep Chinese supply chains still matter enormously to America. This is even truer in categories that include the advanced-manufacturing products where American officials are keenest to limit China’s presence. When it comes to these goods, China’s share of American imports declined by 14 percentage points between 2017 and 2022, whereas those from Taiwan and Vietnam—countries that import heavily from China—gained the greatest market share. In short, Chinese activity is still vital to the production of even the most sensitive products.Exactly how the re-routing works in practice differs across countries and industries. A few products can be sourced only in China. These include some processed rare earths and metals where Chinese companies dominate entire industries, such as the gallium used in chip production and the lithium processed for electric-vehicle batteries. Sometimes exports to America and the rest of the West from their allies are nothing more than Chinese products that have been repackaged to avoid tariffs. Most often, though, inputs are simply mechanical or electrical parts that could be found elsewhere at greater cost by an assiduous importer, but are cheaper and more plentiful in China. Pass the parcelAll three types of phony decoupling can be found in China’s backyard. The latest official data, published in 2018, concerning exports by the Association of Southeast Asian Nations (ASEAN), a regional club, show that 7% by value were actually attributable to some form of production in China—a figure that is probably an underestimate given how difficult it is to disentangle trade. Fresher data suggest that China has only grown in importance since then. The country has increased its share of exports to the bloc in 69 of 97 product categories monitored by ASEAN. Electronic exports, the largest category, which covers everything from batteries and industrial furnaces to hair clippers, have exploded. In the first six months of the year Chinese sales of these goods in Indonesia, Malaysia, Thailand, the Philippines and Vietnam rose to $49bn, up by 80% compared with five years ago. There is a similar pattern in foreign direct investment, where Chinese spending in crucial South-East Asian countries has overtaken America’s.Factories farther afield are also humming with Chinese activity, perhaps most notably in the car industry. In Mexico the National Association of Autopart Makers, a lobby group, has reported that last year 40% of nearshoring investment came from sites moving to the country from China. A rich supply of intermediate goods is duly following. In the past year Chinese companies exported $300m a month in parts to Mexico, more than twice the amount they managed five years ago. In central and eastern Europe, where the car industry has boomed in recent years, phony decoupling is even more conspicuous. In 2018 China provided just 3% of automotive parts brought into the Czech Republic, Hungary, Poland, Slovakia, Slovenia and Romania. Since then, Chinese imports have surged, thanks to the rapid adoption of electric vehicles, of which the country increasingly dominates production. China now provides 10% of all car parts imported into central and eastern Europe, more than any other country outside the eu.Tighter trade links between America’s allies and China are the paradoxical result of America’s desire for weaker ones. Companies panicked by worsening relations across the Pacific are pursuing “China plus one” strategies, keeping some production in the world’s second-largest economy, while moving the rest to countries, such as Vietnam, that are friendlier to Uncle Sam. Yet American demand for final products from allies also tends to boost demand for Chinese intermediate inputs, and produces incentives for Chinese firms to operate and export from alternative locations. Although Apple, the world’s largest company by market capitalisation, has moved production outside China in recent years, this comes with a caveat: much of the production still relies on Chinese companies. The tech giant lists 25 producers in Vietnam on its official suppliers list. Nine are from mainland China.How concerning should this state of affairs be to American policymakers? In the worst case—a war in which supplies of goods between China and America are almost completely severed—dealing only indirectly with China or with Chinese firms on the soil of third countries is probably an improvement on Chinese production. Moreover, companies are adapting to security rules so as to reduce costs for consumers. But that carries its own risks: a belief that decoupling is under way may obscure just how critical Chinese production remains to American supply chains.The fact that so much production in Asia, Mexico and parts of Europe ultimately relies on imports and investment from China helps explain why so many governments, particularly in Asia, are at best fair-weather friends to America, at least when it comes to shifting supply chains. After all, if forced to choose sides once and for all, exporters would suffer mightily. A recent study by researchers at the IMF models a scenario in which countries must pick between America and China, with their decision on which of the two superpowers to side with decided by recent voting patterns at the UN. Such a scenario, the researchers calculate, would reduce GDP by as much as 4.7% for the worst-affected countries. Those in South-East Asia would be struck particularly hard.FrenemiesGiven that most countries are desperate for the investment and employment that trade brings, America has been unable to convince its allies to reduce China’s role in their supply chains. Many are content to play both sides—receiving Chinese investment and intermediate goods, and exporting finished products to America and the rest of the West. Ironically, then, the process driving America and China apart in trade and investment may actually be forging stronger financial and commercial connections between China and America’s allies. Needless to say, that is not what President Biden had in mind. ■ More

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    Mortgage credit availability sinks to decade low

    The MBA’s monthly index measuring credit availability dropped in July to the lowest level since 2013, indicating that lending standards are tightening even further.
    While availability for all loan types dropped, jumbo loan availability decreased the most.

    A man enters a Bank of America branch in New York.
    Scott Mlyn | CNBC

    As if higher mortgage rates weren’t enough, it was harder even to qualify for a mortgage in July than it has been in a decade, according to the Mortgage Bankers Association.
    Its monthly index measuring credit availability dropped in July to the lowest level since 2013, indicating that lending standards are tightening even further.

    While availability for all loan types dropped, the component of the index for jumbo loans fell the most, as banks face increasing liquidity issues. Jumbo loans cannot be sold to Fannie Mae and Freddie Mac, so they are usually held on bank balance sheets.
    Higher mortgage rates have caused demand for home loans to drop. Mortgage applications to purchase a home are 26% lower than they were a year ago, and refinance demand is off 32%, according to the MBA’s most recent weekly survey.
    “Declining origination volumes have led to lower profitability for many lenders, resulting in narrower loan product offerings to reduce operational costs,” said Joel Kan, an MBA economist, in a release.
    A decline in cash-out refinance programs was a major component of the overall drop in credit availability.
    The average rate on the 30-year fixed mortgage is now hovering around 7%, more than double what it was just two years ago when refinancing was booming.
    Most borrowers today would rather not have to trade out a 3% rate for a 7% rate just to pull cash out of their homes. They are instead turning to home equity lines of credit, which are second liens. More

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    Electric Cadillac Escalade to test GM’s EV strategy, cash machine

    General Motors on Wednesday will reveal a new all-electric version of the Cadillac Escalade.
    The new model will test the luxury SUV’s prestige for a new era of drivers and the company’s strategy to turn its most lucrative vehicles into money-making EVs.
    GM has called the Escalade IQ, which is expected to share little to nothing with the traditional models, the “reinvention of an icon,” rather than a replacement, for now.

    2023 Cadillac Escalade V-Series

    NEW YORK – General Motors on Wednesday will reveal a new all-electric version of the Cadillac Escalade, testing the luxury SUV’s prestige for a new era of drivers and the company’s strategy to turn its most lucrative vehicles into money-making EVs.
    GM CEO Mary Barra and other executives have promised Wall Street that the automaker’s new EVs will be profitable, targeting EV profits comparable to gas-powered models by mid-decade and annual EV revenue of $90 billion by 2030.

    But slower-than-expected electric vehicle launches, inflated raw material costs and emerging concerns about consumer acceptance have some doubting the automaker’s ability to achieve the scale it needs to deliver on such targets.
    The all-electric Escalade “IQ” will be an important proof point for reassuring investors.
    The Escalade IQ is the first – and most important – traditional Cadillac model to be released as an EV. It’s set to eventually replace the current gas- and diesel-powered vehicles, unlike Cadillac’s Lyriq and Celestiq EVs that represented new entries for the brand.
    “The Escalade is one of the lynchpin or capstone vehicles for GM. It is the sweet spot of their image and profitability,” said Tyson Jominy, J.D. Power vice president of data and analytics. “It certainly defines the Cadillac brand. Beyond that, it’s an extraordinarily profitable brand itself for General Motors.”

    Cadillac plans to exclusively sell all-electric vehicles by 2030, making it GM’s luxury EV brand. Investors will be watching for how, or whether, the automaker can also transfer the Escalade’s lofty profit margins – estimated at upward of 30% – to the EV models.

    Cadillac Vice President John Roth declined to discuss Escalade profit margins but said the vehicle “certainly carries its fair share of weight” for the brand. Current models start from about $81,000 to $150,000 for a limited-edition performance variant.
    The EV version is expected to be priced toward the upper end of that range. GM declined to comment on pricing ahead of the vehicle’s reveal Wednesday in New York City.
    “When you make your franchise player an EV, you send a statement to the world that in no uncertain terms, Cadillac is going all-electric,” Roth, who started his current position in June, told CNBC.

    ‘Reinvention of an icon’

    The Escalade SUVs, including a larger “ESV” model, are among the most expensive vehicles bought by U.S. consumers.
    Auto insights firm Edmunds reports the average transaction price for an Escalade was $115,500 through the first half of this year. That places it below the industry-leading Mercedes-Benz G-Class SUV at more than $202,000, but above nearly 300 other vehicles, excluding exotics such as Ferrari and Lamborghini.
    Sales of Escalades have grown in importance to the brand, representing upward of 30% of Cadillac’s U.S. sales in recent years. GM says it has sold more than 1 million Escalades globally since the vehicle was introduced in 1998, a vast majority of which have been sold in the U.S.
    “The introduction of Escalade gave Cadillac a flagship. Realistically, over the years, Escalade has become an icon,” Michael Simcoe, GM’s global design chief, told CNBC. “It’s earned and deserves its position as a true luxury vehicle and the top of the Cadillac range now.”

    GM Chair and CEO Mary Barra addresses investors Oct. 6, 2021 at the GM Tech Center in Warren, Michigan.
    Photo by Steve Fecht for General Motors

    GM has called the Escalade IQ, which is expected to share little to nothing with the traditional models, the “reinvention of an icon,” rather than a replacement, for now.
    The automaker plans to initially sell the new electric Escalade IQ alongside the current traditional models.
    Rory Harvey, who previously led Cadillac before becoming head of GM North America in June, described the strategy as “a stunning proposition in terms of having the two variants” that will allow the company to better juggle production with demand.
    The electric Escalade will be produced at a factory in Detroit alongside EV versions of the GMC Hummer, Chevrolet Silverado and Cruise Origin shuttle. The vehicles all share GM’s new “Ultium” vehicle platform, batteries, motors and other components.
    The traditional Escalade will continue to be produced at GM’s Arlington Assembly in Texas along with full-size SUVs from Chevrolet and GMC that share a vehicle platform and other components with the Escalade.

    A close-up of the illuminated front end of the electric Cadillac Escalade IQ, including a black crystal shield badge.

    A teaser video released by GM of the Escalade IQ appears to have more design elements similar to the automaker’s Cadillac Lyriq and Cadillac Celestiq than the traditional Escalade. The vehicle features an illuminated grille, vertical headlights and a potentially smoother exterior.
    Simcoe, who has been with GM for roughly 40 years, said the goal of the IQ was to build upon the Escalade’s reputation without encroaching on the current models with internal combustion engines (ICE).
    “The intention is to not take anything away from the ICE Escalade … and that’s one of the challenges. How do you do a vehicle as good as that and then up your game,” he told CNBC.

    Status symbol

    But the Escalade carries more significance to GM than just profits.
    The vehicle has grown into a status symbol, highlighted in hundreds of songs, TV shows and movies for the rich, stylish and powerful.
    Such appearances assisted the early adoption of the vehicle, according to Wayne Cherry, a former GM design chief who oversaw the first-generation Escalade. That led GM to increasingly differentiate the Escalade from its GMC and Chevrolet sibling SUVs despite largely sharing the same mechanical components.

    The first-generation Cadillac Escalade was produced from 1998 through 2000 by General Motors.

    “I think the design evolution has been excellent. It continues to look distinctive and recognizable and has evolved extremely well with the advances in technology,” Cherry said in an email.
    GM regularly uses the Escalade to debut new technologies and design characteristics that then trickle down to the rest of the Cadillac brand or other vehicles in GM’s lineup.
    Ivan Drury, senior manager of insights at Edmunds, believes the Escalade IQ could continue such trends for a new generation of Cadillac buyers, without the gas-guzzling stigma.
    “The vehicle exudes excess. It’s meant to say, ‘I don’t care about the following things including being eco-conscious or -friendly,'” Drury said. “But the thing about IQ is you could potentially get all of those new eyeballs … It’s something that really does bring new blood to the brand.” More

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    Boeing aircraft deliveries fall in July as company plans to raise output

    Boeing has handed over 309 new aircraft to customers in the first seven months of the year.
    The manufacturer has been ramping up output of its bestselling 737 Max to 38 a month.
    Aircraft deliveries from rival Airbus have outpaced Boeing’s so far this year.

    Boeing 787 Dreamliners are built at the aviation company’s North Charleston, South Carolina, assembly plant on May 30, 2023. 
    Juliette Michel | AFP | Getty Images

    Boeing delivered 43 aircraft to customers last month as it tries to ramp up output with airline customers clamoring for new jets.
    The handovers were down from 60 in June but brought Boeing’s total deliveries in the first seven months of the year to 309, an increase of nearly 28% from the same period in 2022.

    Last month, Boeing said it was transitioning production of its bestselling 737 Max plane to a pace of 38 a month from 31. Despite production problems earlier this year and a brief strike at key supplier Spirit Aerosystems, Boeing’s CFO, Brian West, last month reiterated the company still expects to deliver 400 to 450 Max jets this year.
    Boeing’s chief rival, Airbus, last week said it has handed over 381 planes in the first seven months of the year.
    Boeing said it logged net orders for 52 aircraft in July, which included a firmed-up order from Saudi Arabian Airlines, or Saudia, for 39 Boeing 787 Dreamliners, a deal first announced in March. More

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    Eli Lilly raises full-year guidance as Mounjaro, other drugs drive second-quarter profit up 85%

    Eli Lilly raised its full-year guidance as second-quarter profit jumped 85% from the same period a year ago on strong sales from the pharmaceutical giant’s drug pipeline.
    The company reported $8.31 billion in sales for the quarter, up 28% from the same period a year ago. 
    The company saw strong results in breast cancer pill Verzenio, Type 2 diabetes drug Jardiance and newer drugs like Mounjaro, a diabetes injection.

    Sopa Images | Lightrocket | Getty Images

    Eli Lilly on Tuesday raised its full-year guidance as second-quarter profit jumped 85% from the same period a year ago on strong sales from the pharmaceutical giant’s diabetes treatment Mounjaro and other drugs.
    The company now expects full-year revenue of between $33.4 billion and $33.9 billion, up from a previous forecast of $31.2 billion to $31.7 billion. Eli Lilly also increased its adjusted earnings guidance to a range of $9.70 to $9.90 per share for the year, up from a range of $8.65 to $8.85.

    Shares of Eli Lilly jumped 9% in premarket trading Tuesday.
    Here’s how Eli Lilly performed, compared with Wall Street expectations, based on a survey of analysts by Refinitiv:

    Adjusted earnings: $2.11 per share, vs. $1.98 per share expected
    Revenue: $8.31 billion, vs. $7.58 billion expected

    The company booked net income of $1.76 billion, or $1.95 per share, for the quarter. That’s up from net income of $952.5 million, or $1.05 per share, for the same period a year ago. 
    Accounting for charges associated with some intangible assets and losses on securities, the company recorded adjusted income of $1.9 billion, or $2.11 per share.
    The company’s $8.31 billion in sales for the quarter marked a 28% increase from the same period a year ago. 

    Drug results

    Revenue growth was driven by sales of breast cancer pill Verzenio, which rose 57% to $926.8 million for the quarter. Sales of Jardiance, a tablet that lowers blood sugar in Type 2 diabetes patients, climbed 45% to $668.3 million for the second quarter.
    Newer drugs like Mounjaro, the company’s Type 2 diabetes injection, also fueled revenue growth, posting $979.7 million in sales for the quarter. The drug was first approved in the U.S. in May 2022 and notched just $16 million in sales in the year-ago period. 
    Investors have pinned high hopes on Mounjaro’s potential mega-blockbuster trajectory beyond diabetes, with some research suggesting that it may be even more effective at reducing weight than Novo Nordisk’s popular Wegovy and Ozempic injections.
    Last month, Eli Lilly filed for Food and Drug Administration approval of the injection for chronic weight management.
    Eli Lilly said it “has experienced and continues to expect intermittent delays fulfilling orders of certain Mounjaro doses given significant demand.”
    The company in April sold the rights to its emergency diabetes treatment Baqsimi to Amphastar Pharmaceuticals, which brought in $579 million to the top line during the second quarter.
    But sales of cancer drug Alimta weighed on revenue. The treatment, first launched in 2004, saw sales plunge 73% to $60.9 million for the second quarter. 
    Alimta’s last U.S. patent expired in May, resulting in lower demand as cheaper generic competitors entered the market. 
    Eli Lilly also reported no sales from its Covid-19 antibody treatments, compared with $129 million in the second quarter of 2022. The Food and Drug Administration rescinded its approval of the company’s antibody bebtelovimab in November.

    Pipeline and acquisitions

    Eli Lilly’s stock has been on a tear in recent months, driven in part by positive trial results for its Alzheimer’s drug, donanemab, and the company’s progress with its promising obesity drug pipeline. 
    Shares of Eli Lilly are up more than 24% for the year. With a market value of roughly $431 billion, Eli Lilly is the second-largest pharmaceutical company based in the U.S. after Johnson & Johnson.
    Eli Lilly in July announced a $1.93 billion deal to buy Versanis, a privately held obesity drug maker. 
    This story is developing. Please check back for updates. More

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    Regulators hit Wall Street banks with $549 million in penalties for record-keeping failures

    U.S. regulators on Tuesday announced a combined $549 million in penalties against Wall Street firms that failed to maintain electronic records of employee communications.
    The Securities and Exchange Commission announced charges and $289 million in fines against 11 firms for “widespread and longstanding failures” to maintain records, including by allowing employees to use unsupervised side channels such as messaging apps WhatsApp and Signal, the regulator said.
    The Commodity Futures Trading Commission also said it fined four banks a total of $260 million for failing to maintain records required by the agency.

    U.S. Securities and Exchange Commission (SEC) Chairman Gary Gensler, testifies before the Senate Banking, Housing and Urban Affairs Committee during an oversight hearing on Capitol Hill in Washington, September 15, 2022.
    Evelyn Hockstein | Reuters

    U.S. regulators on Tuesday announced a combined $549 million in penalties against Wall Street firms that failed to maintain electronic records of employee communications.
    The Securities and Exchange Commission announced charges and $289 million in fines against 11 firms for “widespread and longstanding failures” to maintain records, including by allowing employees to use unsupervised side channels such as messaging apps WhatsApp and Signal, the regulator said.

    The Commodity Futures Trading Commission also said it fined four banks a total of $260 million for failing to maintain records required by the agency.
    Wells Fargo, the fourth biggest U.S. bank by assets and a relatively small player on Wall Street, racked up the most fines, with a total of $200 million in penalties.
    This story is developing. Please check back for updates. More