Unveiling the cost of non-compliance: 16 firms hit with $81m in SEC fines

Unveiling the cost of non-compliance: 16 firms hit with $81m in SEC fines

In a significant move underscoring the persistent focus on regulatory compliance within the financial sector, the Securities and Exchange Commission (SEC) has once again made headlines by imposing fines on another 16 firms.

Theta Lake, a pioneer in digital communications governance, recently explained what these new fines mean for recordkeeping compliance.

These penalties, amounting to a substantial $81m, are in addition to the hefty $2.6bn already levied for similar transgressions related to the maintenance and preservation of electronic communications. This development serves as a potent reminder that the issue of recordkeeping is a non-negotiable aspect of regulatory compliance that is here to stay.

The recent SEC investigations have shed light on the pervasive and entrenched nature of recordkeeping violations across the industry, Theta Lake said. The entities involved encompass a mix of five broker-dealers, seven entities registered as both broker-dealers and investment advisers, along with four affiliated investment advisers. The SEC’s findings reveal a widespread practice of using unapproved or ‘off-channel’ communication methods among employees at all levels of seniority, including supervisors and senior managers. These communications often pertained to recommendations and advice and were conducted without proper oversight or preservation, dating back to at least January 2019.

An alarming aspect of the investigation was the discovery of widespread non-compliance with firms’ own communication policies and procedures. Despite clear policies prohibiting the use of unmonitored electronic communication methods, employees frequently resorted to personal email, chats, and text messaging applications for business-related communications. This blatant disregard for established protocols highlights a significant oversight in enforcing and monitoring compliance within these firms.

In response to these findings, the implicated firms have embarked on extensive efforts to rectify their compliance frameworks. Measures include the appointment of independent compliance consultants, enhancements to training programs, and the adoption of technology solutions aimed at bolstering record retention capabilities. Such steps underscore the importance of proactive compliance strategies in mitigating regulatory risks and avoiding the financial and reputational damages associated with non-compliance.

The SEC’s actions serve as a clarion call to the financial services industry, emphasizing the critical need to revisit and strengthen communication compliance practices. The recent penalties reinforce the message that regulatory bodies have zero tolerance for lapses in recordkeeping and communication monitoring. As firms navigate the complexities of modern communication platforms, it is imperative that they implement robust systems to ensure all communications are captured, monitored, and preserved in compliance with regulatory requirements.

Theta Lake’s role in addressing these challenges cannot be overstated. With backing from major players like Cisco, RingCentral, Salesforce, and Zoom, Theta Lake’s award-winning suite of compliance and security products stands at the forefront of enabling secure and compliant use of collaboration platforms. Their solutions offer a comprehensive approach to capturing, archiving, and monitoring electronic communications across a myriad of platforms, ensuring firms can meet their regulatory obligations with confidence and efficiency.

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