US SEC hits more Wall Street firms with fines over record-keeping

[February 10, 2024]  By Chris Prentice and Doina Chiacu
 
NEW YORK/WASHINGTON (Reuters) -A new group of Wall Street firms has agreed to pay more than $81 million in civil penalties to settle U.S. Securities and Exchange Commission charges of record-keeping failures, the regulator said on Friday.  

The seal of the U.S. Securities and Exchange Commission (SEC) is seen at their headquarters in Washington, D.C., U.S., May 12, 2021. REUTERS/Andrew Kelly//File Photo

The settlements with broker-dealers and investment advisers, including Oppenheimer & Co. Inc and U.S. Bancorp, are the latest in a multi-year initiative by the SEC to investigate how registered financial firms handle employees' work-related communications on personal devices and apps, such as WhatsApp.

"The SEC’s investigations uncovered pervasive and longstanding uses of unapproved communication methods, known as off-channel communications," the agency said in a statement.

The companies admitted that employees "communicated through personal text messages about the business of their employers" and "sent and received off-channel communications related to recommendations made or proposed to be made and advice given or proposed to be given," the SEC said.

Since 2021, the SEC has hit dozens of firms including big banks such as JPMorgan Chase & Co and Wells Fargo & Co with fines of $1.7 billion over such compliance failures. Broker dealers and investment advisers, which are registered with the SEC, are subject to record-keeping requirements. The increasing use of off-channel communications has complicated companies' efforts to meet those requirements.

Northwestern Mutual Investment Services firms agreed to pay $16.5 million; Guggenheim agreed to pay $15 million; Oppenheimer will pay $12 million; Cambridge Investment Research firms and Keybank entities will each pay $10 million; Lincoln Financial Advisors will pay $8.5 million; and U.S. Bancorp agreed to pay $8 million, according to the SEC's orders.

Huntington Investment Company firms will pay $1.25 million after self-reporting the issues, the SEC said.

The firms admitted the facts and have begun improving compliance policies and procedures, regulators said.

A lawyer for Guggenheim declined to comment. Counsel for the other firms did not respond to requests for comment.

(Reporting by Chris Prentice in New York and Doina Chiacu in Washington; Editing by Susan Heavey, Barbara Lewis, Philippa Fletcher and Leslie Adler)

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