As the regulatory landscape is constantly evolving, Compliance Risk Concepts (“CRC”) is issuing its monthly […]
September 29, 2023
Bloomberg reported that Citadel has indicated it is planning to push back against the SEC if it moves against the firm, going so far as to take the SEC to court. Such a court case would be a first among firms against whom the SEC has made allegations of untracked communications.
This update follows a Reuters article earlier in the week that identified Citadel among a group of more than two dozen investment advisers from whom the SEC has reportedly requested messages on personal devices or applications of a selection of employees, including senior management.
The SEC’s approach appears to put senior executives at risk as a matter of course in these investigations. As noted in the reporting, the general review of business communications on personal devices opens the door to a range of inquiry. This transforms what may have been seen as a books and record issue into an entry point for the SEC to take an interest in the underlying substantive communications, which could relate to any aspect of the business, transactions, dealings with customers, etc.
Additionally, executives who are found to have violated their employer’s compliance policies regarding off-channel communications may face employment consequences.
CRC will continue to monitor developments in what could result in the first legal challenge to the SEC’s recent off-channel communications approach to investment advisers, however, despite the potential for a legal challenge from the industry, any resolution is speculative and does not change the reality for firms at the present. Our view is that firms should be very focused on taking steps now to understand and mitigate their risks related to electronic communications to better position themselves ahead of a regulator request or examination.
CRC keeps its thumb on the pulse of the evolving regulatory landscape. Keep an eye out for additional information about this developing situation, as well as the SEC’s continued focus on electronic communications, including updated guidance, risk alerts, and CRC’s thoughts on how to ensure successful compliance with evolving regulatory expectations within your firm’s existing regulatory compliance program.
Contact Mitch Avnet for further details: (646)346-2468 | email@example.com