SEC imposes $390M in fines in crackdown on shoddy record-keeping

Dive Brief:

The Securities and Exchange Commission fined 26 financial services companies a total of $390 million for breaking federal record-keeping laws.
Ameriprise Financial Services, Edward D. Jones, Raymond James and 23 other firms admitted to the facts of their SEC orders, the agency said Wednesday, noting their “widespread and longstanding failures to maintain and preserve electronic communications.”
SEC investigators found routine use of “off-channel communications” at levels as high as supervisor and senior manager, the agency said, adding that un-archived messaging thwarts thorough investigations.

Dive Insight:

SEC Enforcement Director Gurbir Grewal in the past several months has slammed several financial services companies for flawed or non-existent record-keeping.

In September 2023, the agency charged Robert W. Baird & Co., William Blair & Company, Nuveen Securities and seven other firms with record-keeping failures, imposing combined penalties of $79 million. One of the firms that faced charges — Interactive Brokers Corp. — agreed to pay a $35 million fine.

A month earlier, the SEC charged BNP Paribas Securities and 10 other Wall Street firms with failing to maintain electronic communications, exacting penalties totaling $289 million. Wells Fargo Securities agreed to pay a $125 million fine.

In announcing the penalties a year ago, Grewal said that the SEC had brought 30 similar enforcement actions to date, and ordered more than $1.5 billion in fines.

“We remain committed to ensuring compliance with the books and record requirements of the federal securities laws, which are essential to investor protection and well-functioning markets,” Grewal said.

Financial services companies that reach out to the SEC about record-keeping flaws face lighter fines.

Among the firms penalized this month, “there are several that differentiated themselves by self-reporting prior to the staff’s investigation, demonstrating once again the real benefits of proactive cooperation,” Grewal said.

Separately, the Commodity Futures Trading Commission on Wednesday charged TD Bank, a registered swap dealer, with failing to supervise its electronic communications surveillance system during a five-year period. TD Bank agreed to pay a $4 million penalty.