$63.1 Million in Penalties for Recordkeeping Failures (12 Firms Charged)
SEC RELEASES
Introduction
The SEC continues to investigate and charge Firms that fail to meet regulatory requirements around recordkeeping.
On January 13, 2025, nine (9) Investment Advisers and three (3) Broker Dealers faced penalties totaling $63.1 Million for failing to preserve electronic communications of their employees.
As the industry awaits to see the SEC’s goals for 2025 with the new upcoming SEC Chair, this recent charge serves as a reminder to Firms that compliance mistakes can be costly.
What Was Discovered?
- Employees at these twelve (12) Firms had sent and received Off-Channel Communications that involved, or were related to, recommendations given.
- One (1) Broker Dealer, due to an error by its Third-Party Vendor, failed to retain almost 330,000 messages.
- In the majority of cases, the use of Off-Channel Communications involved employees at all levels of the company.
- A Firm that self-reported to the SEC received a reduced fine of $600,000 which is significantly lower than the median charge of $8.5 million.
Vigilant’s Conclusion
This recent charge is the latest in a long list of heavy penalties Firms have faced for failing to properly retain records of Electronic Communications.
It is essential that Firms have a clear policy related to off-channel communications, along with a culture of compliance that ensures the policies are followed.
This SEC charge serves as a reminder that Firms can be held responsible for compliance failures resulting from the actions of third-party providers. Firms must perform due diligence over their vendors on a consistent basis.
Whether you need a Best Practice Compliance Review or End-to-End/Targeted Compliance Support, Vigilant is here to help in tailoring our services to your specific needs. Schedule a call with a member from our Executive Team by clicking the button below.