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Twenty-six Wall Street companies have agreed to pay $393mn to the Securities and Exchange Commission to settle the latest round of charges over employee texting and messaging on platforms such as WhatsApp about business matters.
Ameriprise, Edward Jones, LPL Financial and Raymond James are among the financial groups settling with the SEC, with each of those four paying $50mn in penalties, the regulator announced on Wednesday. The fines range as high as $50mn a company and as low as $400,000, the regulator said, noting that the groups which self-reported violations will pay “significantly lower” penalties than they otherwise would have.
The fines underscore how far the agency’s probe has expanded from its initial target of big investment banks to broker-dealers and investment advisers. Industry advocates protested the inquiry’s expanding parameters, saying the SEC was overstepping its bounds because the record-keeping rules are slightly different for money managers.
Gurbir Grewal, who heads the SEC’s enforcement division, said: “We remain committed to ensuring compliance with the books and records requirements of the federal securities laws, which are essential to investor protection and well-functioning markets.”
Other fines include $45mn for RBC Capital Markets, $40mn for BNY Mellon Securities and Pershing, and $30mn for TD Securities and two affiliates, the SEC said.
The regulator’s orders repeatedly say investigators found “pervasive off-channel communications at various seniority levels” of the groups agreeing to settlements. In the case of Piper Sandler, which agreed to pay a $14mn penalty to the SEC, a department head sent “numerous” messages in 2021 with at least 20 colleagues and at least nine “external contacts in the securities industry” relating to brokerage business matters, the SEC said.
Broker-dealers and advisers are required to preserve certain employee communications relating to business matters to ensure compliance with securities laws, namely anti-fraud measures and standards of financial responsibility, the SEC noted. The regulator said the rules are necessary to protect investors, and that failure to comply can undermine investigations.
The settlements and fines reflect the latest fallout from the SEC’s sprawling industry-wide probe since JPMorgan Chase agreed to pay $200mn to the SEC and Commodity Futures Trading Commission in late 2021. The SEC has levied roughly $2bn in financial penalties against dozens of companies through record-keeping investigations since late 2021.
“We are strongly concerned that the SEC is attempting to exceed its authority under the Advisers Act and engaging in rulemaking by enforcement through its current sweep regarding off-channel communications,” the Investment Company Institute, which represents the interests of US asset managers, said in a previous letter to the SEC.