SEC Levies $79 Million in Penalties on Brokerage Firms.

SEC Levies $79 Million in Penalties on Brokerage Firms.

Time Stamp: November 21, 2023 11:08 AM
SEC Levies $79 Million in Penalties on Brokerage Firms. PlatoBlockchain Data Intelligence. Vertical Search. Ai.

The
Securities and Exchange Commission (SEC) has announced charges against five
broker-dealers, three dually registered broker-dealers and investment advisers,
and two affiliated investment advisers for widespread and longstanding failures
to maintain and preserve electronic communications.

The
firms, including Interactive Brokers Corp., Robert W. Baird & Co. Inc.,
William Blair & Company LLC, Nuveen Securities LLC, Fifth Third Securities
Inc., and Perella Weinberg Partners LP, have collectively agreed to pay $79
million in penalties.

The
SEC’s investigations revealed pervasive and longstanding off-channel
communications at all 10 firms. Employees at these firms communicated through
personal text messages about their business activities, violating recordkeeping
provisions of the federal securities laws.

The
broker-dealer and investment adviser firms admitted to their employees sending
and receiving off-channel communications related to recommendations and advice
but failed to maintain or preserve the substantial majority of these
communications.

The
penalties include a $35 million fine for Interactive Brokers, a $15 million
penalty for Robert W. Baird & Co. Inc., a $10 million penalty for William
Blair & Company LLC, an $8.5 million penalty for Nuveen Securities LLC, an
$8 million penalty for Fifth Third Securities Inc., and a $2.5 million penalty
for Perella Weinberg Partners LP.

Gurbir
S. Grewal, Director of the SEC’s Division of Enforcement, noted: “One of
the orders included in today’s announced actions is not like the others. There
are real benefits to self-reporting, remediating and cooperating.”

Apart
from the financial penalties, the firms have agreed to cease and desist from
future violations, received censures, and committed to implementing
improvements in their compliance policies and procedures. They will also retain
independent compliance consultants to conduct comprehensive reviews of their
policies and procedures related to the retention of electronic communications
on personal devices. The Commodity Futures Trading Commission also announced
settlements with Interactive
Brokers for related conduct.

SEC Highlights Broker-Dealers
Falling Behind in AML Program Revisions

In an earlier report, Finance Magnates noted that the SEC
issued a warning to broker-dealers, urging them to enhance their anti-money
laundering (AML) policies and procedures, specifically emphasizing due
diligence when opening new customer accounts. The regulator highlighted
concerns about inadequate resources, including staff allocation, devoted to AML
compliance programs by some broker-dealers.

The SEC outlined guidelines
for broker-dealers, stressing the necessity of implementing and maintaining a
comprehensive AML program aligned with the Bank Secrecy Act and its
regulations. Additionally, the regulator noted deficiencies in timely testing
of AML controls and updates to AML programs among certain broker-dealers.

The
Securities and Exchange Commission (SEC) has announced charges against five
broker-dealers, three dually registered broker-dealers and investment advisers,
and two affiliated investment advisers for widespread and longstanding failures
to maintain and preserve electronic communications.

The
firms, including Interactive Brokers Corp., Robert W. Baird & Co. Inc.,
William Blair & Company LLC, Nuveen Securities LLC, Fifth Third Securities
Inc., and Perella Weinberg Partners LP, have collectively agreed to pay $79
million in penalties.

The
SEC’s investigations revealed pervasive and longstanding off-channel
communications at all 10 firms. Employees at these firms communicated through
personal text messages about their business activities, violating recordkeeping
provisions of the federal securities laws.

The
broker-dealer and investment adviser firms admitted to their employees sending
and receiving off-channel communications related to recommendations and advice
but failed to maintain or preserve the substantial majority of these
communications.

The
penalties include a $35 million fine for Interactive Brokers, a $15 million
penalty for Robert W. Baird & Co. Inc., a $10 million penalty for William
Blair & Company LLC, an $8.5 million penalty for Nuveen Securities LLC, an
$8 million penalty for Fifth Third Securities Inc., and a $2.5 million penalty
for Perella Weinberg Partners LP.

Gurbir
S. Grewal, Director of the SEC’s Division of Enforcement, noted: “One of
the orders included in today’s announced actions is not like the others. There
are real benefits to self-reporting, remediating and cooperating.”

Apart
from the financial penalties, the firms have agreed to cease and desist from
future violations, received censures, and committed to implementing
improvements in their compliance policies and procedures. They will also retain
independent compliance consultants to conduct comprehensive reviews of their
policies and procedures related to the retention of electronic communications
on personal devices. The Commodity Futures Trading Commission also announced
settlements with Interactive
Brokers for related conduct.

SEC Highlights Broker-Dealers
Falling Behind in AML Program Revisions

In an earlier report, Finance Magnates noted that the SEC
issued a warning to broker-dealers, urging them to enhance their anti-money
laundering (AML) policies and procedures, specifically emphasizing due
diligence when opening new customer accounts. The regulator highlighted
concerns about inadequate resources, including staff allocation, devoted to AML
compliance programs by some broker-dealers.

The SEC outlined guidelines
for broker-dealers, stressing the necessity of implementing and maintaining a
comprehensive AML program aligned with the Bank Secrecy Act and its
regulations. Additionally, the regulator noted deficiencies in timely testing
of AML controls and updates to AML programs among certain broker-dealers.

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