Last week, the US Securities and Exchange Commission (SEC) announced civil penalties of $63 million against 12 firms, including investment advisers and broker-dealers, for employee use of unauthorized messaging apps.
"Each of the SEC's investigations uncovered the use of unapproved communication methods, known as off-channel communications, at these firms," the SEC explained in a press release. “As described in the SEC's orders, the firms admitted that, during the relevant periods, their personnel sent and received off-channel communications that were records required to be maintained under the securities laws. The failures involved personnel at multiple levels of authority, including supervisors and senior managers.”
The fines against the firms whose transgressions had been discovered by regulators ranged from $4 million (Santander) to $12 million (Blackstone). Notably, PJT Partners was fined just $400 thousand, as it self-reported the misconduct. All twelve of the firms had already begun implementing improvements to their compliance programs as of when the fines were announced.
"In order to effectively carry out their oversight responsibilities, the Commission's Examinations and Enforcement Divisions must, and indeed do, rely heavily on registrants complying with the books and records requirements of the federal securities laws," said Sanjay Wadhwa, Acting Director of the SEC's Division of Enforcement. "When firms fall short of those obligations, the consequences go far beyond deficient document productions; such failures implicate the transparency and the integrity of the markets and their participants, like the firms at issue here."
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