The US’ Securities and Exchange Commission (SEC) has recently charged 11 firms for record keeping failures. The firms – 10 broker-dealers and one dually registered as a broker-dealer and investment adviser – were fined a total penalty of USD289 million. According to a press release by SEC, the violations concerned the maintenance and preservation of electronic communication records.
BNP Paribas Securities, Wells Fargo Securities, and SG Americas Securities were among the firms charged. SEC reveals that its investigation of these firms had “uncovered pervasive and longstanding ‘off-channel’ communications” that date back to at least 2019. Employees at multiple levels of authority – including supervisors and senior executives – have been found communicating through various personal devices “about the business of their employers”. The firms had not kept a record of these communications, which is a violation of federal securities laws.
Citing the 30 enforcement actions and USD1.5 billion in penalties that SEC has meted out to date, Gurbir S. Grewal, director of the Division of Enforcement reminds market participants that compliance is essential to investor protection and well-functioning markets. Should slip-ups happen, firms are expected to self-report, cooperate, and remediate. The 11 firms have agreed to hire independent compliance consultants to conduct comprehensive reviews of their communications and record keeping policies.
