SEC 'Off-Channel' Communications Sweep Settlement Update

In early October, the Securities and Exchange Commission (SEC) announced settlements with 10 broker-dealers and affiliated investment advisers in connection with their failures to maintain and preserve electronic “off-channel” communications. These settlements follow a series of enforcement actions by the SEC and the Commodity Futures Trading Commission (CFTC), dating back to September 2022, against large financial institutions for violations of their broker-dealer recordkeeping obligations in failing to retain and review business-related electronic communications transmitted by firm employees outside of firm recordkeeping systems. In these cases, the SEC found that the settling firms, as result of their failures to capture the “off-channel” communications, likely deprived the Commission of relevant and responsive documents in various SEC investigations. The failures involved employees at multiple levels of authority, including supervisors and senior managers. As stated by an Akin Gump client alert, “ this latest round of settlements is further evidence that the SEC continues to take seriously off-channel communications and recordkeeping.”

Click here to read Akin Gump’s client alert on the SEC’s off-channel enforcement sweep.