26 Firms Fined for Failure to Retain Texts and Chats

In a now-common scenario, the SEC has reportedly fined 26 broker-dealers, investment advisers, and dual registrants for not preventing their employees from using “off-channel” communications like texting to discuss business with colleagues and clients. As expected, the majority of these firms were broker-dealers, whose record-keeping requirements are broader compared to those for investment advisers. The fines ranged from $400,000 to $50 million:

• Ameriprise Financial Services, LLC agreed to pay a $50 million penalty
• Edward D. Jones & Co., L.P. agreed to pay a $50 million penalty
• LPL Financial LLC agreed to pay a $50 million penalty
• Raymond James & Associates, Inc. agreed to pay a $50 million penalty
• RBC Capital Markets, LLC agreed to pay a $45 million penalty
• BNY Mellon Securities Corporation, together with Pershing LLC, agreed to pay a $40 million penalty
• TD Securities (USA) LLC, together with TD Private Client Wealth LLC and Epoch Investment Partners, Inc., agreed to pay a $30 million penalty
• Osaic Services, Inc., together with Osaic Wealth, Inc., agreed to pay an $18 million penalty
• Cowen and Company, LLC, together with Cowen Investment Management LLC, agreed to pay a $16.5 million penalty
• Piper Sandler & Co. agreed to pay a $14 million penalty
• First Trust Portfolios L.P. agreed to pay an $8 million penalty
• Apex Clearing Corporation agreed to pay a $6 million penalty
• Truist Securities, Inc., together with Truist Investment Services, Inc. and Truist Advisory Services, Inc., which self-reported, agreed to pay a $5.5 million penalty
• Cetera Advisor Networks LLC, together with Cetera Investment Services LLC, which self-reported, agreed to pay a $4.5 million penalty
• Great Point Capital, LLC agreed to pay a $2 million penalty
• Hilltop Securities Inc., which self-reported, agreed to pay a $1.6 million penalty
• P. Schoenfeld Asset Management LP agreed to pay a $1.25 million penalty
• Haitong International Securities (USA) Inc. agreed to pay a $400,000 penalty

Despite having policies in place that prohibited off-channel communications, employees at all levels failed to adhere to these rules. As a result, the firms were also charged with failure to supervise, as they did not adequately monitor compliance with these policies.

The SEC noted that three of the 26 firms self-reported their violations and received lesser penalties. However, the differences in penalties seem minimal, as all firms faced substantial fines and were required to admit to violations of record-keeping and supervisory rules under the Exchange Act and Advisers Act. Additionally, all were mandated to engage compliance consultants to review their electronic communication policies.

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