The Securities and Exchange Commission today announced charges against 11 firms in their capacity as broker-dealers and one dually registered broker-dealer and investment adviser for widespread and longstanding failures by the firms and their employees to maintain and preserve electronic communications. The firms admitted the facts outlined in their respective orders, ther regulator said. They acknowledged that their conduct violated recordkeeping provisions of the federal securities laws, agreed to pay combined penalties of $289 million and have begun implementing improvements to their compliance policies and procedures.
- Wells Fargo Securities with Wells Fargo Clearing Services and Wells Fargo Advisors Financial Network agreed to pay a $125 million penalty;
- BNP Paribas Securities Corp. and SG Americas Securities each agreed to pay penalties of $35 million;
- BMO Capital Markets and Mizuho Securities USA each agreed to pay penalties of $25 million;
- Houlihan Lokey Capital has agreed to pay a $15 million penalty;
- Moelis & Company and Wedbush Securities have each agreed to pay penalties of $10 million; and
- SMBC Nikko Securities America has agreed to pay a $9 million penalty.
“Compliance with the books and records requirements of the federal securities laws is essential to investor protection and well-functioning markets. To date, the Commission has brought 30 enforcement actions and ordered over $1.5 billion in penalties to drive this foundational message home. And while some broker-dealers and investment advisers have heeded this message, self-reported violations, or improved internal policies and procedures, today’s actions remind us that many still have not,” said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement. “So here are three takeaways for those firms who haven’t yet done so: self-report, cooperate and remediate. If you adopt that playbook, you’ll have a better outcome than if you wait for us to come calling.”
The SEC’s investigation uncovered pervasive and longstanding “off-channel” communications at all 11 firms. As described in the SEC’s orders, the firms admitted that from at least 2019, their employees often communicated through various messaging platforms on their personal devices, including iMessage, WhatsApp, and Signal, about the business of their employers. The firms did not maintain or preserve the substantial majority of these off-channel communications, in violation of federal securities laws. By failing to maintain and preserve required records, certain of the firms likely deprived the Commission of these off-channel communications in various SEC investigations. The failures involved employees at multiple levels of authority, including supervisors and senior executives.
In addition to the financial penalties, each of the firms was ordered to cease and desist from future violations of the relevant recordkeeping provisions and was censured. The firms also agreed to retain independent compliance consultants to, among other things, conduct comprehensive reviews of their policies and procedures relating to the retention of electronic communications found on personal devices and their respective frameworks for addressing non-compliance by their employees with those policies and procedures.
Separately, the Commodity Futures Trading Commission announced settlements with Wells Fargo Bank, Wells Fargo Securities, BNP Paribas Securities, BNP Paribas S.A., SG Americas Securities, Société Générale S.A., Bank of Montreal, and Wedbush Securities for related conduct. Read more.
