The United States Securities and Exchange
Commission (SEC) on Tuesday announced that 15 broker-dealers and one affiliated
investment adviser have agreed to pay combined penalties of over $1.1 billion
for their recordkeeping failures.
The American regulator said it uncovered “pervasive
off-channel communications” in the firms.
SEC explained, “From January 2018 through
September 2021, the firms’ employees routinely communicated about business
matters using text messaging applications on their personal devices.
“The firms did not maintain or preserve the
substantial majority of these off-channel communications, in violation of the
federal securities laws.”
The regulator said it charged the 16 business
organizations for “widespread and long-standing failures” to “maintain
and preserve [their] electronic communications.”
The charged firms include the following eight
firms: Barclays Capital Inc., Bank of America (BofA) Securities Inc., Citigroup
Global Markets Inc., Credit Suisse Securities (USA) LLC, Deutsche Bank
Securities Inc., Goldman Sachs & Co. LLC, Morgan Stanley & Co. LLC, and
UBS Securities LLC.
Of these eight firms, five were charged
alongside with their affiliates: Merrill Lynch, Pierce, Fenner & Smith Inc.
(BofA), DWS Distributors Inc. (Deutsche Bank Securities), DWS Investment
Management Americas, Inc. (Deutsche Bank Securities), Morgan Stanley Smith
Barney LLC (Morgan Stanley & Co); and UBS Financial Services Inc. (UBS
Securities LLC).
In addition, the SEC disclosed that Jefferies
LLC, Nomura Securities International, Inc., and Cantor Fitzgerald & Co were
also charged.
Breakdown of the Penalty
According to the market supervisor, while the
first eight firms and their five affiliates have agreed to pay penalties of
$125 million each, Jefferies LLC and Nomura Securities International acceded to paying penalties of $50 million each.
On the other hand, Cantor Fitzgerald & Co.,
an investment bank and brokerage company, agreed to pay a $10 million penalty.
SEC explained, “Each of the 15 broker-dealers
was charged with violating certain recordkeeping provisions of the Securities
Exchange Act of 1934 and with failing reasonably to supervise with a view to
preventing and detecting those violations.
“DWS Investment Management Americas, Inc., the
investment adviser, was charged with violating certain recordkeeping provisions
of the Investment Advisers of 1940 and with failing reasonably to supervise
with a view to preventing and detecting those violations.”
The watchdog noted that the firms admitted to
violating recordkeeping provisions of the country’s federal securities laws and
have begun implementing improvements to their compliance policies and procedures.
SEC also noted that the derivatives market
regulator, the Commodity Futures Trading Commission, announced settlements with
the firms for related conduct.
The United States Securities and Exchange
Commission (SEC) on Tuesday announced that 15 broker-dealers and one affiliated
investment adviser have agreed to pay combined penalties of over $1.1 billion
for their recordkeeping failures.
The American regulator said it uncovered “pervasive
off-channel communications” in the firms.
SEC explained, “From January 2018 through
September 2021, the firms’ employees routinely communicated about business
matters using text messaging applications on their personal devices.
“The firms did not maintain or preserve the
substantial majority of these off-channel communications, in violation of the
federal securities laws.”
The regulator said it charged the 16 business
organizations for “widespread and long-standing failures” to “maintain
and preserve [their] electronic communications.”
The charged firms include the following eight
firms: Barclays Capital Inc., Bank of America (BofA) Securities Inc., Citigroup
Global Markets Inc., Credit Suisse Securities (USA) LLC, Deutsche Bank
Securities Inc., Goldman Sachs & Co. LLC, Morgan Stanley & Co. LLC, and
UBS Securities LLC.
Of these eight firms, five were charged
alongside with their affiliates: Merrill Lynch, Pierce, Fenner & Smith Inc.
(BofA), DWS Distributors Inc. (Deutsche Bank Securities), DWS Investment
Management Americas, Inc. (Deutsche Bank Securities), Morgan Stanley Smith
Barney LLC (Morgan Stanley & Co); and UBS Financial Services Inc. (UBS
Securities LLC).
In addition, the SEC disclosed that Jefferies
LLC, Nomura Securities International, Inc., and Cantor Fitzgerald & Co were
also charged.
Breakdown of the Penalty
According to the market supervisor, while the
first eight firms and their five affiliates have agreed to pay penalties of
$125 million each, Jefferies LLC and Nomura Securities International acceded to paying penalties of $50 million each.
On the other hand, Cantor Fitzgerald & Co.,
an investment bank and brokerage company, agreed to pay a $10 million penalty.
SEC explained, “Each of the 15 broker-dealers
was charged with violating certain recordkeeping provisions of the Securities
Exchange Act of 1934 and with failing reasonably to supervise with a view to
preventing and detecting those violations.
“DWS Investment Management Americas, Inc., the
investment adviser, was charged with violating certain recordkeeping provisions
of the Investment Advisers of 1940 and with failing reasonably to supervise
with a view to preventing and detecting those violations.”
The watchdog noted that the firms admitted to
violating recordkeeping provisions of the country’s federal securities laws and
have begun implementing improvements to their compliance policies and procedures.
SEC also noted that the derivatives market
regulator, the Commodity Futures Trading Commission, announced settlements with
the firms for related conduct.
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