16 Wall Street Firms Charged by the SEC for Widespread Recordkeeping Failures
What happened?
On Sept. 27, 2022, the Securities and Exchange Commission (“SEC”) charged 15 broker-dealers and one affiliated investment adviser for widespread and longstanding failures by the firms and their employees to maintain and preserve electronic communications. According to the SEC press release, “the firms admitted the facts set forth in their respective SEC orders, acknowledged that their conduct violated recordkeeping provisions of the federal securities laws, agreed to pay combined penalties of more than $1.1 billion, and have begun implementing improvements to their compliance policies and procedures to settle these matters.”
Employees of these firms routinely used text message applications on personal devices to discuss business matters. Each firm failed to properly maintain records of the majority of these communications. These recordkeeping failures occurred at all 16 firms and involved employees at all levels of authority, including senior executives. The SEC investigations uncovered these failures by asking firms to gather communication from the personal devices of a sample of personnel.
“These actions deliver a straightforward message to registrants: You are expected to abide by the Commission’s recordkeeping rules,” said Sanjay Wadhwa, Deputy Director of Enforcement.
- The following eight firms (and five affiliates) have agreed to pay penalties of $125 million each:
- Barclays Capital Inc.;
- BofA Securities Inc., together with Merrill Lynch, Pierce, Fenner & Smith Inc.;
- Citigroup Global Markets Inc.;
- Credit Suisse Securities (USA) LLC;
- Deutsche Bank Securities Inc., together with DWS Distributors Inc. and DWS Investment Management Americas, Inc.;
- Goldman Sachs & Co. LLC;
- Morgan Stanley & Co. LLC, together with Morgan Stanley Smith Barney LLC; and
- UBS Securities LLC, together with UBS Financial Services Inc.
- The following two firms have agreed to pay penalties of $50 million each:
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- Jefferies LLC; and
- Nomura Securities International, Inc.
- Cantor Fitzgerald & Co. has agreed to pay a $10 million penalty.
To read the full press release, click here.
What does this mean for me?
The message is clear: Recordkeeping will continue to be a priority of examinations and enforcements. Firms must create a compliance program that effectively reviews and monitors the use and retention of electronic communications.
Fairview® provides full-service compliance administration for investment advisers by creating and implementing comprehensive, sustainable compliance programs, including ongoing testing and evaluations to ensure firms remain compliant with SEC regulations. We make sure that internal controls are built into your operations processes, making compliance features inherent to your firm’s culture. Contact us today for additional information about maintaining your compliance program.
