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Twenty-six Wall Street firms have agreed to pay the Securities and Exchange Commission $393 million to settle the latest round of allegations that employees sent text messages and messages on platforms like WhatsApp about company matters.
Ameriprise, Edward Jones, LPL Financial and Raymond James are among the financial groups that have reached settlements with the SEC, with each of the four paying $50 million in penalties, the regulator announced Wednesday. The fines range from a maximum of $50 million per company to a minimum of $400,000, the regulator said, noting that groups that self-reported violations will pay “significantly lower” penalties than they otherwise would have faced.
The fines underscore how the agency’s investigation has expanded from its initial focus on big investment banks to broker-dealers and financial advisers. Industry advocates have protested the expansive scope of the investigation, saying the SEC was overstepping its bounds because the recordkeeping rules are slightly different for fund managers.
Gurbir Grewal, head of the SEC’s enforcement division, said: “We remain committed to ensuring compliance with the accounting and recordkeeping requirements of the federal securities laws, which are essential to investor protection and the proper functioning of markets.”
Other fines include $45 million for RBC Capital Markets, $40 million for BNY Mellon Securities and Pershing, and $30 million for TD Securities and two affiliates, the SEC said.
Regulatory orders repeatedly state that investigators found “widespread off-channel communications at various levels of seniority” of the groups that agreed to settlements. In the case of Piper Sandler, which agreed to pay a $14 million penalty to the SEC, a department head sent “numerous” messages in 2021 to at least 20 colleagues and at least nine “external securities industry contacts” related to brokerage business matters, the SEC said.
Broker-dealers and advisers are required to retain certain employee communications related to company matters to ensure compliance with securities laws, including anti-fraud measures and financial responsibility standards, the SEC noted. The regulator said the rules are needed to protect investors and that failure to comply could jeopardize investigations.
The settlements and fines reflect the latest fallout from the SEC’s sweeping industry-wide probe since JPMorgan Chase agreed to pay $200 million to the SEC and the Commodity Futures Trading Commission in late 2021. The SEC has levied about $2 billion in financial penalties on dozens of companies through recordkeeping investigations since late 2021.
“We are deeply concerned that the SEC is attempting to overstep its authority under the Advisers Act and engage in regulatory activity through the ongoing crackdown on out-of-channel communications,” the Investment Company Institute, which represents the interests of U.S. asset managers, said in an earlier letter to the SEC.
