SEC

Wall Street firms to pay $1.1 billion in penalties for violations of electronic record-keeping rules

The SEC said employees conducted business using apps on personal devices.
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The Securities and Exchange Commission has announced charges against 16 Wall Street firms after finding that employees conducted business on their personal devices, in violation of federal securities laws. The companies have agreed to pay fines totaling more than $1.1 billion.

At issue are what the agency says are “pervasive off-channel communications,” with employees using messaging apps to conduct business between January 2018 and September 2021. The actions led to “widespread and longstanding failures by the firms and their employees to maintain and preserve electronic communications.”

The affected companies included “15 broker-dealers and one affiliated investment adviser,” according to the SEC. Goldman Sachs, Morgan Stanley, Credit Suisse, and Barclays Capital are among the firms that have agreed to pay penalties of $125 million each.

“Finance, ultimately, depends on trust. By failing to honor their recordkeeping and books-and-records obligations, the market participants we have charged today have failed to maintain that trust,” SEC Chair Gary Gensler said in a statement. “Since the 1930s, such recordkeeping has been vital to preserve market integrity. As technology changes, it’s even more important that registrants appropriately conduct their communications about business matters within only official channels, and they must maintain and preserve those communications.”

Along with the monetary penalties, the firms were ordered to “cease and desist from future violations,” and agreed to conduct reviews of their policies and procedures around electronic record-keeping retention.—KL

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