16 Broker-Dealers Receive Charges from the SEC for Off-Channel Communication Failure
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The Securities and Exchange Commission has placed charges against 16 broker-dealers and advisers with top players, Oppenheimer and Guggenheim, among the 16 firms. These companies were charged for failing to uphold electronic communications. They will pay over $81 million for the failure.
The 16 firms comprise many brokers/dealers and affiliated investment advisors. Apart from Oppenheimer and Guggenheim, other firms like Northwestern Mutual and Investment Research were also fined.
Huntington Gets Lowest Fine Amount
Gurbir Grewal, the Director of SEC Enforcement Division said the fine was placed to ensure these companies obey and follow the recordkeeping requirements. He also revealed that the Huntington Investment firm received a $1.25 million fine which is a lesser fine compared to others. This was because the company willingly reported itself to the commission.
The Northwestern firm received the highest fine of $16.5 million. Guggenheim came second with a $15 million charge, while Oppenheimer & Co. and Cambridge received $12 million and $10 million fines respectively.
Northwestern does not allow the usage of unapproved communication methods by its employees. With the order in place, all messages sent through the allowed communication methods were frequently watched and reviewed. However, this won’t apply to the messages sent through other means like personal devices and unapproved apps.
Although these policies were made, they haven’t been followed as Northwestern has yet to provide a follow-up system for strict measures.
The firm received and responded to an order from the commission to release documents and records concerning this case. As Northwestern failed to preserve these records, the SEC suspects that the firm may have taken them away.
The SEC Seeks To Improve Compliance In The Industry
The US SEC has been raising its standards against companies that hide or fail to report important information about their business. The off-channel communication sweep in September 2022 has brought up huge fines of about $1.1 billion.
Some of the top broker/dealers such as Citigroup, Morgan Stanley, UBS, and Bank of America have all been charged. In May 2023, the commission fined Scotia Capital and HSBC $7.5 million and $15 million to pay for the recordkeeping failures of WhatsApp and some other off-channel communications.
In August, BMO Capital Markets, Wells Fargo, and many other companies with similar accusations decided to jointly pay $289 million to the Securities and Exchange Commission. Moreover, ten other companies agreed to provide $79 million in settlements as announced last September.
After the settlements, each company aims to provide third-party compliance consultants to assess their electronic communications rules and procedures regarding personal devices.
