SEC Announces Charges Against Broker-Dealer Firms for Recordkeeping Failures

The Securities and Exchange Commission (SEC) Division of Enforcement announced charges against 11 firms, 10 broker-dealers and one dual registered broker-dealer and investment adviser for failures by the firm and employees to maintain and preserve electronic communications. Each broker-dealers was charged with violating particular recordkeeping provisions of the Securities Exchange Act of 1934, while Wedbush Securities Inc., a dually registered broker-dealer and investment adviser, was also charged with violating recordkeeping provisions of the Investment Advisers Act of 1940 and the ’34 Act. The firms admitted that beginning around 2019, employees engaged in communication through various messaging platforms on their personal devices about firm business. These conversations were not preserved thus depriving the Commission of “these off-channel communications in various SEC investigations.” Gurbir Grewal, Director of the SEC’s Division of Enforcement, stated, “Compliance with the books and records requirements of the federal securities laws is essential to investor protection and well-functioning markets.” He added there are “three takeaways for those firms who haven’t yet done so: self-report, cooperate and remediate.” According to the press release, the firms charged acknowledged “their conduct violated recordkeeping provisions of the federal securities laws,” and they agreed to pay combined penalties of $289 million and implemented improvements to their compliance policies and procedures to address the violations.

Click here to read the Commission’s press release on the broker-dealer off-channel communication charges.