The hammer drops: SEC and CFTC impose huge fines for regulatory failures in FinTech


UK-based RegTech Custodia has provided an outline of the recent heavy fines plastered on FinTechs by the SEC and CFTC.

The United States Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) have imposed fines totalling $289m and $260m respectively on thirteen firms for failure to maintain proper record-keeping. The SEC has levied charges on 11 firms, with 10 operating as broker-dealers and one as both a broker-dealer and investment adviser. Meanwhile, the CFTC has set its sights on four companies, with two featuring on both lists.

These significant fines stem from these companies’ chronic inability to uphold their regulatory responsibility of retaining electronic communications. This is a fundamental obligation under federal securities laws. The move is part of a risk-based inquiry by the commissions into how broker-dealers have been preserving business-related communications that are sent and received via personal devices.

The financial penalties are momentous, to say the least. The implicated firms have acknowledged their wrongdoings and vowed to improve their compliance measures. Their failure to properly document and preserve communications, particularly those on off-channel platforms like WhatsApp and Signal, has seriously undermined both regulatory oversight and investor trust.

Among those penalised are well-established names in the industry such as Wells Fargo Securities, BNP Paribas Securities Corp., and SG Americas Securities. Their failure to retain electronic communications effectively, including messages sent via platforms like iMessage and WhatsApp from personal devices, has attracted heightened scrutiny from regulators.

Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, emphasised the importance of self-reporting, cooperation, and remediation for firms wanting to receive lenient treatment. “Adherence to regulations is paramount, and those who fail to comply will face consequences,” Grewal stated.

This episode goes beyond merely financial repercussions. It serves as a pressing reminder to all companies in the FinTech sector about the absolute necessity for effective compliance and record-keeping. As regulations continue to evolve, ensuring proper retention of communications will remain a linchpin in the eyes of regulators for protecting investors and maintaining market integrity.

Read the full post here.

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