The Securities and Exchange Commission (SEC) has fined ten firms a combined penalty of $79 million for alleged inadequate recordkeeping. The regulator said the crackdown exposed a trend of inadequate electronic communication maintained across the broker-dealers and investment advisers.

The SEC took action against five broker-dealers, three dually registered broker-dealers and investment advisers, and two affiliated investment advisers for failing to maintain and preserve electronic communications properly. These firms have admitted responsibility, acknowledging that their actions violated recordkeeping provisions stipulated by federal securities laws.

Gurbir Grewal, the Director of the SEC's Division of Enforcement, said: "One of the orders included in today's announced actions is not like the others. There are real benefits to self-reporting, remediating and cooperating."

Off-Channel Communication Lapses

The penalties are as follows:

• Interactive Brokers Corp. and Interactive Brokers LLC (together Interactive Brokers) – $35 million;
• Robert W. Baird & Co. Inc. – $15 million;
• William Blair & Company LLC and William Blair Investment Management LLC (WBIM) – $10 million;
• Nuveen Securities LLC – $8.5 million;
• Fifth Third Securities Inc. – $8 million;
• Perella Weinberg Partners LP (Perella Weinberg), Tudor, Pickering, Holt & Co. Securities LLC (TPH), and Perella Weinberg Partners Capital Management LP (Perella Weinberg Capital) – $2.5 million.

The SEC discovered widespread off-channel communications within all the 10 firms. The broker-dealers confessed that since at least 2019, their employees have been using personal text messages for business-related discussions, while investment advisers admitted to sending and receiving off-channel communications concerning investment recommendations and advice.

SEC Enforces Compliance Measures

In addition to the financial penalties, the SEC ordered each firm to cease and desist from any future violations of relevant recordkeeping provisions. Furthermore, these firms must retain independent compliance Compliance In finance, banking, investing, and insurance compliance refers to following the rules or orders set down by the government regulatory authority, either as providing a service or processing a transaction. Compliance concerning finance would also be a state of being following established guidelines or specifications. This designation can also encompass efforts to ensure that organizations are abiding by both industry regulations and government legislation. Understanding ComplianceCompliance is a In finance, banking, investing, and insurance compliance refers to following the rules or orders set down by the government regulatory authority, either as providing a service or processing a transaction. Compliance concerning finance would also be a state of being following established guidelines or specifications. This designation can also encompass efforts to ensure that organizations are abiding by both industry regulations and government legislation. Understanding ComplianceCompliance is a Read this Term consultants to conduct a review of their policies.

In a separate report, Interactive Brokers Corp. and Interactive Brokers LLC are set to pay a civil monetary penalty of $20 million following an enforcement action by the Commodity Futures Trading Commission (CFTC). The penalty results from their alleged failure to maintain and preserve crucial records mandated by CFTC CFTC The 1974 Commodity Exchange Act (CEA) in the United States created the Commodity Futures Trading Commission (CFTC). The Commission protects and regulates market activities against manipulation, fraud, and abuse trade practices and promotes fairness in futures contracts. The CEA also included the Sad-Johnson Agreement, which defined the authority and responsibilities for the monitoring of financial contracts between the Commodity Futures Trading Commission and the Securities and Exchange Commiss The 1974 Commodity Exchange Act (CEA) in the United States created the Commodity Futures Trading Commission (CFTC). The Commission protects and regulates market activities against manipulation, fraud, and abuse trade practices and promotes fairness in futures contracts. The CEA also included the Sad-Johnson Agreement, which defined the authority and responsibilities for the monitoring of financial contracts between the Commodity Futures Trading Commission and the Securities and Exchange Commiss Read this Term's recordkeeping requirements, a lapse in supervising matters about their roles as CFTC registrants, and procedures related to electronic communication retention on personal devices.

"The order also finds the widespread use of unapproved communication methods violated Interactive Brokers' internal policies and procedures, which generally prohibited business-related communication taking place via unapproved methods," the CFTC said.