Businesses fined $81 million by the SEC for poor recordkeeping

Recent allegations that the U.S. Securities and Exchange Commission (SEC) settled with sixteen well-known investment advisers and broker-dealers generated headlines.

Tyree Schoen

February 23, 2024

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Wealth

the core of the problem? Another aspect in the SEC's fierce campaign against off-channel contacts is a failure to keep necessary electronic records. Since its launch in December 2021, this campaign has persevered unwaveringly, demonstrating the regulatory body's dedication to maintaining strict recordkeeping guidelines in the finance sector.

The ACA Group went into further detail on the subject and its implications for the financial industry in a recent piece.

It's interesting to note that one of the 16 accused firms was singled out in the SEC's order for special attention. This company was fined $1.25 million, which was comparatively light since it had proactively self-reported its deficiencies to the SEC. The sanctions for the remaining 15 companies, however, ranged greatly, ranging from $8 million to $16.5 million. The disparity in fines is a clear indication of the advantages that self-reporting and working with authorities can provide.

The latest steps taken by the SEC are an important reminder for financial sector companies. Businesses must actively improve their compliance programs, particularly with regard to off-channel communications. By doing this, businesses can avoid possible enforcement proceedings in addition to reducing the chance of examination deficiencies. Foundational steps in this procedure include making sure that all business conversations are recorded via authorized channels and regularly testing for indications of unapproved channel usage.

Additionally, using a third-party service for improved electronic communication surveillance might give a business access to specialized training and risk-based assessment. Training on acceptable and unacceptable communication techniques, technology for recording and storing essential communications, and procedures for handling unintentional use of forbidden channels are all essential.

Furthermore, in order to guarantee compliance, the SEC's guideline recommends using certifications and attestations on a frequent basis—possibly even quarterly. This strategy emphasizes how crucial it is for the entire company to uphold regulatory requirements, which will promote an industry-wide compliance and openness culture.