SEC fines 10 broker-dealers for record keeping failures
08 August 2023 US
Image: AdobeStock/qingwa
The Securities and Exchange Commission (SEC) has charged 10 broker-dealer firms with recordkeeping failures and with violations relating to their use of electronic communications and their failure to preserve business messaging conducted on personal devices.
The firms were collectively fined US$298 million by the US securities markets regulator for violating recordkeeping provisions of the Securities and Exchanges Act of 1934 and these firms have already started to introduce changes to improve their compliance policies and procedures.
The largest fine, of US$125 million, was applied to Wells Fargo Securities LLC, Wells Fargo Clearing Services LLC and Wells Fargo Advisers Financial Network.
Additionally BNP Paribas Securities Corporation and SG Americas Securities LLC have agreed to pay US$35 million in settlement, and BMO Capital Markets Corporation and Mizuho Securities USA LLC have each agreed to penalties of US$25 million.
This follows a fine imposed last week on Wedbush Securities Inc, a Los Angeles-based broker-dealer and investment adviser, which was also charged with recordkeeping failures under the Investment Advisers Act of 1940, as described in SFT on 2 August 2023.
Commenting on these rulings, SEC director of enforcement Gurbir S Grewal says: “Compliance with the books and records requirements of the federal securities laws is essential to investor protection and well-functioning markets. To date, the Commission has brought 30 enforcement actions and ordered over US$1.5 billion in penalties to drive this foundational message home.
“And while some broker-dealers and investment advisers have heeded this message, self-reported violations, or improved internal policies and procedures, today’s actions remind us that many still have not. So here are three takeaways for those firms who haven’t yet done so: self-report, cooperate and remediate. If you adopt that playbook, you’ll have a better outcome than if you wait for us to come calling.”
Sanjay Wadhwa, the SEC’s deputy director of enforcement, says: “Today’s actions stem from our continuing sweep to ensure that regulated entities, including broker-dealers and investment advisers, comply with their recordkeeping requirements, which are essential for us to monitor and enforce compliance with the federal securities laws.
“Recordkeeping failures such as [these] undermine our ability to exercise effective regulatory oversight, often at the expense of investors. The 11 firms settling today have acknowledged that their conduct violated the law regarding these crucial requirements and are implementing measures to prevent future similar violations. However, we know that other SEC-regulated entities have committed similar violations, and so our work to enforce industry-wide compliance continues.”
Additionally, each of these firms was censured and required to cease and desist from future violations of these relevant recordkeeping provisions.
The firms will retain independent compliance consultants to review their procedures relating to the retention of electronic communications found on personal devices and their frameworks for addressing non-compliance.
The Commodity Futures Trading Commission has also reached settlements with Wells Fargo Bank, Wells Fargo Securities, LLC, BNP Paribas Securities Corp., BNP Paribas S.A., SG Americas Securities, LLC, Société Générale S.A., Bank of Montreal, and Wedbush Securities Inc, for related conduct.
The firms were collectively fined US$298 million by the US securities markets regulator for violating recordkeeping provisions of the Securities and Exchanges Act of 1934 and these firms have already started to introduce changes to improve their compliance policies and procedures.
The largest fine, of US$125 million, was applied to Wells Fargo Securities LLC, Wells Fargo Clearing Services LLC and Wells Fargo Advisers Financial Network.
Additionally BNP Paribas Securities Corporation and SG Americas Securities LLC have agreed to pay US$35 million in settlement, and BMO Capital Markets Corporation and Mizuho Securities USA LLC have each agreed to penalties of US$25 million.
This follows a fine imposed last week on Wedbush Securities Inc, a Los Angeles-based broker-dealer and investment adviser, which was also charged with recordkeeping failures under the Investment Advisers Act of 1940, as described in SFT on 2 August 2023.
Commenting on these rulings, SEC director of enforcement Gurbir S Grewal says: “Compliance with the books and records requirements of the federal securities laws is essential to investor protection and well-functioning markets. To date, the Commission has brought 30 enforcement actions and ordered over US$1.5 billion in penalties to drive this foundational message home.
“And while some broker-dealers and investment advisers have heeded this message, self-reported violations, or improved internal policies and procedures, today’s actions remind us that many still have not. So here are three takeaways for those firms who haven’t yet done so: self-report, cooperate and remediate. If you adopt that playbook, you’ll have a better outcome than if you wait for us to come calling.”
Sanjay Wadhwa, the SEC’s deputy director of enforcement, says: “Today’s actions stem from our continuing sweep to ensure that regulated entities, including broker-dealers and investment advisers, comply with their recordkeeping requirements, which are essential for us to monitor and enforce compliance with the federal securities laws.
“Recordkeeping failures such as [these] undermine our ability to exercise effective regulatory oversight, often at the expense of investors. The 11 firms settling today have acknowledged that their conduct violated the law regarding these crucial requirements and are implementing measures to prevent future similar violations. However, we know that other SEC-regulated entities have committed similar violations, and so our work to enforce industry-wide compliance continues.”
Additionally, each of these firms was censured and required to cease and desist from future violations of these relevant recordkeeping provisions.
The firms will retain independent compliance consultants to review their procedures relating to the retention of electronic communications found on personal devices and their frameworks for addressing non-compliance.
The Commodity Futures Trading Commission has also reached settlements with Wells Fargo Bank, Wells Fargo Securities, LLC, BNP Paribas Securities Corp., BNP Paribas S.A., SG Americas Securities, LLC, Société Générale S.A., Bank of Montreal, and Wedbush Securities Inc, for related conduct.
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