16 Wall Street firms have been charged by the US Securities and Exchange Commission (SEC) with “longstanding failures” to keep electronic communications in violation of federal securities laws.
The 15 broker-dealers and one investment advisor have collectively agreed to pay more than $1.1 billion in fines for breaking the Securities Exchange Act of 1934 recordkeeping rules. According to the SEC, employees at all the organisations commonly used messaging apps on their personal devices to discuss internal business matters between January 2018 and September 2021.
The SEC claims that the majority of these “pervasive off-channel communications” were not kept or archived, in contravention of federal securities laws. Recordkeeping and books-and-records requirements, according to SEC chair Gary Gensler, are “vital to preserve market integrity.”
“As technology changes, it’s even more important that registrants appropriately conduct their communications about business matters within only official channels, and they must maintain and preserve those communications,” Gensler adds.
Each of the eight companies and its five affiliates has agreed to pay $125 million. Barclays Capital, Bank of America Securities, Citigroup Global Markets, Credit Suisse Securities, Deutsche Bank Securities (together with two affiliates), Goldman Sachs, Morgan Stanley (along with MSSB), and UBS Securities are among them (and UBS Financial Services).
Nomura Securities and Jefferies have each agreed to pay $50 million. Cantor Fitzgerald, one company, has agreed to shell over $10 million in fines. The companies have also agreed to strengthen their compliance rules and procedures in addition to the aforementioned sanctions. The SEC’s division of enforcement head, Gurbir Grewal, calls recordkeeping obligations “sacrosanct.”
Grewal adds: “If there are allegations of wrongdoing or misconduct, we must be able to examine a firm’s books and records to determine what happened.”
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