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SEC Fines 11 Wall Street Firms for Alleged Recordkeeping Violations

by Jared Kirui
  • The companies were fined a combined penalty of USD $289 million.
  • Separately, similar charges have been raised by the CFTC.
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The US securities regulator has fined 11 broker-dealers a combined penalty of USD $289 million for allegedly violating recordkeeping regulations. The Securities and Exchange Commission (SEC) has issued cease and desist orders against the companies which have admitted the violations.

The mentioned companies are the subsidiaries of Well Fargo, which agreed to pay a penalty of USD $125 million. BNB Paribas Securities Corp, and SG Americas Securities, have each agreed to a fine of USD $35 million, according to the statement by the SEC.

The other companies are BMO Capital Markets, Mizuho Securities USA, Houlihan Lokey Capital, Moelis & Company, Wedbush Securities, and SMBC Nikko Securities America. Wedbush, which operates as a broker-dealer and an investments adviser, was charged with additional charges for allegedly violating the Investment Advisers Act of 1940 and failing to prevent or detect the violations.

Investor Protection

Gurbir Grewal, the SEC's Director of Division of Enforcement, said: "Compliance with the books and records requirements of the federal securities laws is essential to investor protection and well-functioning markets."

"And while some broker-dealers and investments advisers have heeded this message, self-reported violations, or improved internal policies and procedures, today's actions remind us that many still have not," he added.

Specifically, the regulator identified off-channel communication in the 11 firms where employees communicated through messaging platforms like WhatsApp, iMessage, and Signal. Thus the companies reportedly did not maintain records of their communications.

Monitoring and Enforcement of Compliance

The SEC maintains that such omission denies the regulator the ability to exercise proper oversight roles such as monitoring and enforcement of compliance with federal securities laws. Additionally, the regulator observed that the violations were conducted by the employees at different levels of authority.

Meanwhile, today (Tuesday), the Commodity Futures Trading Commission (CFTC) imposed more than USD $1 billion in penalties against swap dealers and their affiliated futures commission merchants for allegedly violating bookkeeping procedures.

The CFTC's commissioner, Kristin Johnson said: "The increasingly pervasive use of personal electronic communications, including email, text, social media, and chart-based apps to conduct regulated business may enable faster and easier communication. However, using unapproved channels violates important regulatory requirements for recordkeeping."

The US securities regulator has fined 11 broker-dealers a combined penalty of USD $289 million for allegedly violating recordkeeping regulations. The Securities and Exchange Commission (SEC) has issued cease and desist orders against the companies which have admitted the violations.

The mentioned companies are the subsidiaries of Well Fargo, which agreed to pay a penalty of USD $125 million. BNB Paribas Securities Corp, and SG Americas Securities, have each agreed to a fine of USD $35 million, according to the statement by the SEC.

The other companies are BMO Capital Markets, Mizuho Securities USA, Houlihan Lokey Capital, Moelis & Company, Wedbush Securities, and SMBC Nikko Securities America. Wedbush, which operates as a broker-dealer and an investments adviser, was charged with additional charges for allegedly violating the Investment Advisers Act of 1940 and failing to prevent or detect the violations.

Investor Protection

Gurbir Grewal, the SEC's Director of Division of Enforcement, said: "Compliance with the books and records requirements of the federal securities laws is essential to investor protection and well-functioning markets."

"And while some broker-dealers and investments advisers have heeded this message, self-reported violations, or improved internal policies and procedures, today's actions remind us that many still have not," he added.

Specifically, the regulator identified off-channel communication in the 11 firms where employees communicated through messaging platforms like WhatsApp, iMessage, and Signal. Thus the companies reportedly did not maintain records of their communications.

Monitoring and Enforcement of Compliance

The SEC maintains that such omission denies the regulator the ability to exercise proper oversight roles such as monitoring and enforcement of compliance with federal securities laws. Additionally, the regulator observed that the violations were conducted by the employees at different levels of authority.

Meanwhile, today (Tuesday), the Commodity Futures Trading Commission (CFTC) imposed more than USD $1 billion in penalties against swap dealers and their affiliated futures commission merchants for allegedly violating bookkeeping procedures.

The CFTC's commissioner, Kristin Johnson said: "The increasingly pervasive use of personal electronic communications, including email, text, social media, and chart-based apps to conduct regulated business may enable faster and easier communication. However, using unapproved channels violates important regulatory requirements for recordkeeping."

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