As the regulatory landscape is constantly evolving, Compliance Risk Concepts (“CRC”) is issuing its monthly […]
On September 27, 2022, the SEC announced charges against 15 broker-dealers and one investment adviser for pervasive and longstanding failures to maintain and preserve electronic communications. Monetary penalties ranged from $50 million to $125 million for the charged firms. The settlements also required the firms to retain a compliance consultant to review and assess the firm’s remedial steps relating to recordkeeping practices, policies and procedures, related supervisory practices, and employment actions. The SEC’s investigation found that the firm’s employees, including supervisors and executives, routinely used text-messaging applications on personal devices to communicate about business matters. The SEC determined that the substantial majority of these communications were not maintained or preserved by the firms, which violated federal securities laws.
Regarding a focus on managers in the settlements, Bloomberg News in its reporting on the SEC’s action said: “The SEC’s decision to call out executives -- based on a sampling of messages that banks were asked to gather for the investigation -- may ramp up the pressure on firms to ensure certain managers are held accountable.”
Yesterday’s SEC press release comes less than a year after a similar action by the SEC involving J.P. Morgan Securities LLC (JPMS) was announced in December 2021. In that instance, JPMS’ settlement with the SEC included a $125 million penalty.
CRC believes that the best approach to regulatory compliance is a proactive one. Staying ahead of the curve by taking note of this enforcement activity and using it as a barometer to assess the current regulatory climate can help ensure that a firm is prepared for a regulatory exam. Rather than scrambling to rectify issues or meet deadlines, a thorough, active compliance program that considers and incorporates regulatory developments is in a better position to satisfy regulators and preserve operations so they can best serve their clients.
For more information, please contact:
p. (646) 346-2468
p. (917) 568-6470
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