The Securities and Exchange Commission levied charges against 10 broker-dealers and one investment advisor/broker-dealer for what it called widespread and longstanding failures to maintain and preserve electronic communications.
The 11 firms include Wells Fargo Securities, together with Wells Fargo Clearing Services, and Wells Fargo Advisors Financial Network, which agreed to pay a $125 million penalty.
Also charged were BNP Paribas Securities Corp. and SG Americas Securities, which each agreed to pay penalties of $35 million. In addition, BMO Capital Markets Corp. and Mizuho Securities USA were each hit with $25 million penalties; while Houlihan Lokey Capital has agreed to pay a $15 million penalty. Additionally, Moelis & Company and Wedbush Securities were each slapped with $10 million fines, while SMBC Nikko Securities America got hit with a $9 million penalty.
“Compliance with the books and records requirements of the federal securities laws is essential to investor protection and well-functioning markets. To date, the Commission has brought 30 enforcement actions and ordered over $1.5 billion in penalties to drive this foundational message home. And while some broker-dealers and investment advisers have heeded this message, self-reported violations, or improved internal policies and procedures, today’s actions remind us that many still have not,” Gurbir Grewal, director of the SEC’s Division of Enforcement, said. “So here are three takeaways for those firms who haven’t yet done so: self-report, cooperate and remediate. If you adopt that playbook, you’ll have a better outcome than if you wait for us to come calling.”
Each of the firms acknowledged that their conduct violated record keeping provisions of the federal securities laws and agreed to pay the penalties as outlined. All together, the penalties totaled $289 million. The 10 firms have begun implementing improvements to their compliance policies and procedures to address these violations.
“Today’s actions stem from our continuing sweep to ensure that regulated entities, including broker-dealers and investment advisers, comply with their record keeping requirements, which are essential for us to monitor and enforce compliance with the federal securities laws. Record keeping failures such as those here undermine our ability to exercise effective regulatory oversight, often at the expense of investors,” Sanjay Wadhwa, deputy director of enforcement at the SEC said.
The SEC discovered pervasive and longstanding “off-channel” communications by all 11 firms. The firms admitted that from at least 2019, their employees often communicated through various messaging platforms on their personal devices, including iMessage, WhatsApp, and Signal, about the business of their employers. Further, the firms did not maintain or preserve the substantial majority of these off-channel communications, in violation of the federal securities laws. The failures involved employees at multiple levels of authority, including supervisors and senior executives.
Separately, the Commodity Futures Trading Commission announced settlements with Wells Fargo Bank NA, Wells Fargo Securities, BNP Paribas Securities Corp., BNP Paribas S.A., SG Americas Securities, Société Générale S.A., Bank of Montreal, and Wedbush Securities Inc., for related conduct.