The Securities and Exchange Commission continues to crack down on practices around off-channel communications, with the regulator charging 26 broker/dealers and registered investment advisors this week for “widespread and long-standing failures” to maintain electronic communications.
The firms have agreed to pay combined civil penalties of $392.75 million to settle the violations. Ameriprise Financial, Edward Jones, LPL Financial and Raymond James, which WealthManagement.com previously reported, had the highest penalty, each agreeing to pay $50 million. RBC Capital Markets will pay $45 million, while BNY Mellon Securities Corp., together with Pershing, will pay $40 million.
Other affected firms include TD Securities, Osaic, Cowen and Company, Piper Sandler & Co., First Trust Portfolios, Apex Clearing, Great Point Capital, P. Schoenfeld Asset Management and Haitong International Securities (USA) Inc.
Three firms self-reported the violations and received lower penalties, including Truist Securities, Cetera and Hilltop Securities.
The Commodity Futures Trading Commission also settled charges against The Toronto Dominion Bank, Cowen and Company, and Truist Bank for related conduct.
Specifically, the SEC charged the firms with widespread failures involving personnel at multiple levels, “including supervisors and senior managers,” in meeting record-keeping requirements, particularly for private communications, in which employees communicated via personal text messages and through platforms like WhatsApp.
The firms were also charged with failing to reasonably supervise their personnel.
“As today’s enforcement actions against more than two dozen firms reflect, we remain committed to ensuring compliance with the books and records requirements of the federal securities laws, which are essential to investor protection and well-functioning markets,” said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, in a statement.
WealthManagement.com reported last week that Raymond James was nearing a settlement with the SEC to close its investigation into the use of off-channel business communications at the firm.
Earlier this year, LPL Financial’s quarterly filings revealed it had settled to close the investigation into off-channel communications.
In September 2022, the SEC fined 15 broker/dealers and one investment advisor $1.1 billion to settle charges of “widespread and long-standing failures” with firms’ compliance practices meeting record-keeping requirements through texting and platforms like WhatsApp. The firms included Bank of America Securities, Citigroup Global Markets, Credit Suisse Securities, Deutsche Bank Securities, Goldman Sachs, Morgan Stanley and UBS.
More settlements followed from, among others, Wells Fargo, Interactive Brokers, Nuveen Securities, HSBC and Senvest. In February, the commission fined 16 firms more than $81 million to settle charges they didn’t preserve off-channel communications, including Northwestern Mutual, Guggenheim Securities, Oppenheimer & Co. and Cambridge Investment Research.
