In a significant move underscoring the persistent focus on regulatory compliance within the financial sector, the Securities and Exchange Commission (SEC) has once again made headlines by imposing fines on another 16 firms.
Theta Lake, a pioneer in digital communications governance, recently explained what these new fines mean for recordkeeping compliance.
These penalties, amounting to a substantial $81m, are in addition to the hefty $2.6bn already levied for similar transgressions related to the maintenance and preservation of electronic communications. This development serves as a potent reminder that the issue of recordkeeping is a non-negotiable aspect of regulatory compliance that is here to stay.
The recent SEC investigations have shed light on the pervasive and entrenched nature of recordkeeping violations across the industry, Theta Lake said. The entities involved encompass a mix of five broker-dealers, seven entities registered as both broker-dealers and investment advisers, along with four affiliated investment advisers. The SEC’s findings reveal a widespread practice of using unapproved or ‘off-channel’ communication methods among employees at all levels of seniority, including supervisors and senior managers. These communications often pertained to recommendations and advice and were conducted without proper oversight or preservation, dating back to at least January 2019.
An alarming aspect of the investigation was the discovery of widespread non-compliance with firms’ own communication policies and procedures. Despite clear policies prohibiting the use of unmonitored electronic communication methods, employees frequently resorted to personal email, chats, and text messaging applications for business-related communications. This blatant disregard for established protocols highlights a significant oversight in enforcing and monitoring compliance within these firms.
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