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SEC and CFTC take firm stance: Hefty fines imposed on firms for record-keeping failures

Yesterday, the SEC and CFTC dropped hefty fines of $289 million and $260 million respectively. Thirteen firms got caught using unauthorised messaging platforms. The SEC went after 11 firms – charges under against 10 firms in their capacity as broker-dealers and one dually registered broker-dealer and investment adviser - while the CFTC targeted 4, with two firms making both lists. These firms have been charged for their collective longstanding failure to preserve electronic communications, a regulatory obligation under federal securities laws. The sweep follows the Commission’s risk -based probing broker-dealer in retaining business-related messages sent and received on personal devices.

The fines are staggering. These firms have accepted responsibility, acknowledging their violations and committing to enhance compliance measures. Their failure to maintain proper records has led to this unprecedented enforcement action. The heart of the issue is effective regulatory oversight and safeguarding investor interests. The firms’ failure to keep a tight grip on off-channel communications – using personal devices for business discussions on platforms like WhatsApp, and Signal, and other unapproved applications – had rattled the foundation of trust and compliance.

The list of firms facing penalties includes well-known names such as Wells Fargo Securities, BNP Paribas Securities Corp., SG Americas Securities, and others. Their lapse in preserving electronic communications, including those on personal devices via platforms like iMessage and WhatsApp, has drawn regulatory scrutiny.

Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, has underlined the importance of self-reporting, cooperation, and remediation for firms seeking a favourable outcome. The message is clear: adherence to regulations is paramount, and those who fail to comply will face consequences.

This development resonates beyond just financial penalties. It serves as reminder to all firms about the critical need for effective compliance and record-keeping. As the regulatory landscape evolves, maintaining proper communication records remains the regulators’ cornerstone of investor protection and market integrity.


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