Wall Street’s Off-Channel Communications Cost 26 Firms $393 Million in SEC Fines

The
Securities and Exchange Commission (SEC) has levied fines totaling $392.75
million against 26 financial firms for widespread failures to maintain and
preserve electronic communications. The charges, announced yesterday
(Wednesday), target broker-dealers, investment advisers, and dually-registered
entities for violating federal securities laws’ recordkeeping provisions.

SEC Fines 26 Firms $392.75
Million for Recordkeeping Violations

The firms,
including industry giants Ameriprise Financial Services, Edward D. Jones &
Co., LPL Financial, and Raymond James & Associates, each agreed to pay $50
million in penalties. Other notable fines include $45 million for RBC Capital
Markets and $40 million for BNY Mellon Securities Corporation and Pershing LLC
combined.

Today we announced 26 firms will pay more than $390 million combined to settle charges for widespread recordkeeping failures. https://t.co/A1aPsTt94b pic.twitter.com/tF25ErQs9F

— U.S. Securities and Exchange Commission (@SECGov) August 14, 2024

“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,” SEC Enforcement Director Gurbir S. Grewal,
commented.

Check
the full list of fines:

Three firms
– Truist Securities, Cetera Advisor Networks, and Hilltop Securities – received
reduced penalties for self-reporting their violations, highlighting the SEC’s
emphasis on proactive cooperation.

“Among this
group of firms, there are several that differentiated themselves by
self-reporting prior to the staff’s investigation, demonstrating once again the
real benefits of proactive cooperation,” Grewal added.

In addition
to the financial penalties, all firms were ordered to cease and desist from
future violations and were censured. They have also begun implementing
improvements to their compliance policies and procedures.

The
Commodity Futures Trading Commission (CFTC) announced separate but related
settlements with The Toronto Dominion Bank, Cowen and Company, and Truist Bank.

Other Collective SEC
Penalties

This isn’t
the first instance where the SEC has imposed collective penalties on financial
firms in similar circumstances. In February of this year, the SEC took action
against 16 broker-dealers and financial advisors, including notable entities
like Guggenheim and Oppenheimer. These firms were penalized for failing to
maintain electronic communications, accruing civil penalties totaling over $81
million.

Last year,
the US securities regulator levied fines totaling USD $289 million against 11
broker-dealers for purported violations of recordkeeping regulations. The SEC
issued cease and desist orders to these companies, which have acknowledged the
infractions.

One of the
larger penalties occurred in 2022, when 16 Wall Street firms paid a collective
$1.1 billion for “off-channel communications.” Among the firms
penalized were major banks such as Barclays, Bank of America, Goldman Sachs,
and UBS.

This article was written by Damian Chmiel at www.financemagnates.com.



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