The Securities and Exchange Commission (SEC) announced yesterday (Monday) that twelve major financial firms will pay more than $63 million in penalties for failing to properly maintain and preserve electronic communications records.
It marks another significant enforcement action in the regulator’s ongoing crackdown on Wall Street’s communication practices.
SEC Imposes $63 Million in Fines on Wall Street Firms
Blackstone leads the penalty list with three of its entities agreeing to pay $12 million, followed by KKR with $11 million, and Charles Schwab with $10 million. The enforcement action targeted nine investment advisers and three broker-dealers, all of whom admitted to violating federal securities laws’ recordkeeping provisions.
“In order to effectively carry out their oversight responsibilities, the Commission’s Examinations and Enforcement Divisions must, and indeed do, rely heavily on registrants complying with the books and records requirements of the federal securities laws,” said Sanjay Wadhwa, Acting Director of the SEC’s Division of Enforcement.
“When firms fall short of those obligations, the consequences go far beyond deficient document productions; such failures implicate the transparency and the integrity of the markets and their participants, like the firms at issue here.”
The investigation revealed widespread use of unauthorized communication channels, including messaging apps and personal devices, by personnel across various levels of authority. This brings to mind the “banking cartel” case from years ago, where currency rates were rigged using unauthorized chat platforms for information exchange.
Senior managers and supervisors were among those involved in these “off-channel communications,” which should have been monitored and archived according to federal securities laws.
PJT Partners, which proactively disclosed its violations to the SEC, received significant credit for self-reporting and will pay a reduced penalty of $600,000. Other major firms facing penalties include Apollo Capital Management and Carlyle Investment Management, each agreeing to pay $8.5 million.
“In today’s actions, while holding firms responsible for their recordkeeping failures, the Commission once more recognized and credited a registrant’s self-report, demonstrating yet again that there are tangible benefits to be gained from proactive cooperation,” added Wadhwa.
As part of the settlement, all firms have acknowledged their violations and committed to enhancing their compliance policies and procedures. The SEC’s orders require the firms to cease and desist from future violations and include censures along with the monetary penalties.
“Recordkeeping Failures”
This enforcement action continues the SEC’s aggressive stance on communication compliance and recordkeeping, emphasizing the regulator’s focus on maintaining proper documentation of business-related communications across all platforms.
On the same day, the SEC fined Robinhood $45 million to settle a series of allegations, including recordkeeping violations. The regulator stated that Robinhood failed to address several critical compliance issues, such as investigating suspicious transactions, implementing safeguards against identity theft, mitigating cybersecurity risks, preserving electronic communications, and maintaining core operational databases. The company was also cited for failing to retain some communications with brokerage clients.
In August, the SEC conducted a similar enforcement action, imposing nearly $400 million in penalties on 26 Wall Street firms for violations related to off-channel communications.
The list of firms included major financial institutions such as Ameriprise Financial Services, Edward D. Jones & Co., LPL Financial, and Raymond James & Associates, each agreeing to pay $50 million in fines. Other notable penalties included $45 million for RBC Capital Markets and a combined $40 million for BNY Mellon Securities Corporation and Pershing LLC.
This article was written by Damian Chmiel at www.financemagnates.com.RegulationRead More
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