Crowell & Moring

Emails often provide key evidence in conspiracy-related investigations and subsequent litigation. More recently, social media and text messages have provided additional evidence for such matters. In response, most companies have enacted policies to educate their employees about using these communication mediums. However, recent antitrust investigations and federal lawsuits in the financial services industry are utilizing electronic communications made via Bloomberg Terminal as key evidence. The reported Bloomberg chat evidence in these cases makes clear that companies should reassess whether their internal compliance policies and training need to be updated to mitigate the risk that Bloomberg Terminal evidence – and not just emails and social media content – could create legal liability for the company.

For those who are unfamiliar with Bloomberg Terminal, it is a computer system (originally, a physical terminal) that allows users in various industries to connect to Bloomberg mainframes and access real-time financial market data and related services. Use of these services is widespread, and there are numerous proprietary features uniquely accessible through Bloomberg Terminal that make it particularly popular among investors. One of the key features is the integrated communication channels that allow users private instant messaging and chat room capabilities, referred to as Instant Bloomberg or “IB” for short. In many ways, the communications features operate like a social media platform; they are widely used by employees of financial services and other industry companies to communicate with each other. And, the messaging and IB chat features can be accessed from users’ mobile devices. Bloomberg’s own CEO explains this aspect of the Bloomberg Terminal: “Our 315,000 subscribers exchange 200 million messages a day. They have 15 to 20 million chats a day. They’re a community.”

Bloomberg Terminal communications are an important target for parties seeking electronic evidence from companies that have Bloomberg Terminal subscriptions. First, the terminals are often used to communicate informally and the messages, given their chat-like nature, can blur the line between professional and social, and between appropriate and inappropriate. Second, users and companies have not altered their operations to reflect the fact that the communications can be “permanent” and subject to subpoenas or discovery in litigation. Bloomberg’s website markets the communications features by explaining that “[a]ll chats are archived and auditable, enabling you to fulfill compliance requirements.” Because company policies may need to comply with regulatory requirements regarding data preservation, the policies and training should proactively instruct employees which communication methods should be used and how they should be used. Companies that do not want business conducted via social media avenues should consider treating the communication features provided by financial data vendors with the same caution. Third, Bloomberg Terminal communications are primarily exchanged to obtain valuable and competitive information about prices, companies and market movements in real time to gain an advantage. And, messages are sometimes exchanged between competitors. Therefore, it is no surprise to see regulators increasingly digging through Bloomberg transcripts for evidence of market manipulation, insider trading and other sensitive communications.

The issue of IB chats being a source of e-discovery is not new. In fact, the LIBOR investigations, which sought extensive IB evidence, are now about five years old. But the issue is seeing new light as a result of recent developments. The DOJ brought new criminal charges against certain Rabobank traders, and sentences were recently delivered against banks that had entered into plea deals as part of the ongoing antitrust and fraud criminal investigation into the manipulation of LIBOR. DOJ reported that some of the most compelling evidence was Bloomberg chats, quotes from which are included in court complaints. As the Wall Street Journal reported, “[t]he investigations are focused in part on chat rooms with names such as ‘The Cartel,’” and “[i]nvestigators have found messages in which traders joked about being able to influence currency exchange rates and appeared to inappropriately share information with competitors.”

In addition, the Bloomberg Terminal evidence provided by cooperating banks has led to new criminal investigations. For example, the DOJ announced in October that it began a criminal investigation of potential currency-market rigging. Soon thereafter, a new wave of at least 14 private antitrust lawsuits were filed regarding that alleged manipulation of the foreign exchange market. DOJ’s investigation and the lawsuits brought by investors arise from allegations that banks conspired to fix foreign currency exchange rates using Bloomberg instant messages and chatrooms. The LIBOR and foreign exchange investigations and cases offer a glimpse into how financial services and other industry employees could potentially create legal liability for companies that have used Bloomberg terminals over the last decade, and they make clear the risks of not having and enforcing a clear policy regarding such communications. Moreover, regulators have been increasingly active in exploring these communications as a potential source of other wrongdoing.

Given these trends, financial services firms should review their operations and ensure that their policies and compliance efforts adequately address and protect against the risks of employees using Bloomberg Terminal’s communication features. It is also important that firms conduct thorough, top-down reviews of how their employees have used Bloomberg Terminals over the last decade. First, it is clear that regulators are obtaining substantial amounts of Bloomberg-based communications from cooperating parties in pending investigations and are using that information to launch new investigations.

Second, companies have an incentive to identify potentially unlawful conduct by employees using Bloomberg Terminals because, under the DOJ’s leniency program’s “First in the Door” requirements, leniency is only afforded to the first source to self-report. The LIBOR and foreign exchange investigations have triggered an industry-wide effort to get in front of any additional legal liability and to be the first to self-report in the event any wrongdoing is identified. Specifically, banks and other firms have started to conduct internal investigations and put in place safeguards regarding the use of Bloomberg Terminal communications. The Wall Street Journal recently reported that Goldman Sachs was weighing banning all person-to-person communications via Bloomberg Terminals. And Bloomberg has reported that “[b]anks including JPMorgan Chase & Co., Deutsche Bank AG and Royal Bank of Scotland Group Plc have restricted the use of chat rooms as regulators examine messages for evidence traders manipulated currencies or benchmark rates.” Therefore, firms with operations that involve use of Bloomberg Terminal should consider evaluating their policies and conducting internal top-down reviews.