SEC hands out $79mn in fines over latest round of messaging violations

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Ten Wall Street businesses have agreed to pay a total of $79mn to the Securities and Exchange Commission in the latest round of penalties stemming from messaging by employees on platforms such as WhatsApp.

The SEC on Friday charged broker-dealers and investment advisers — including Perella Weinberg Partners and Interactive Brokers — for “widespread and longstanding failures to maintain and preserve electronic communications”.

The move is the latest salvo by the regulator against Wall Street’s messaging practices. The enforcement actions have pushed banks to revisit their messaging policies and sack some employees.

The companies charged on Friday admitted the SEC’s findings and acknowledged that they violated US securities laws, the regulator said. Perella Weinberg and two of its affiliates, which reported their own violations, agreed to the lowest penalty of $2.5mn.

“One of the orders included in today’s announced actions is not like the others,” said Gurbir Grewal, director of the SEC’s enforcement division. “There are real benefits to self-reporting, remediating and co-operating.”

Interactive Brokers Corp and an affiliate agreed to the highest penalty, at $35mn, and also faced a $20mn fine from the Commodity Futures Trading Commission for similar violations.

According to the SEC, its probe of Interactive Brokers “uncovered pervasive off-channel communications at all seniority levels”. In one instance, a group head in the US had business conversations via text messages and WhatsApp with at least 32 employees.

Robert W Baird & Co agreed to pay $15mn, and William Blair & Company and an affiliate paid $10mn. The other businesses included Nuveen Securities and Fifth Third Securities.

Nuveen and Baird said they were pleased to have resolved the matter. Baird added it was “disappointed with the findings” but had “made enhancements to our compliance procedures in recent years”. William Blair and the Perella entities declined to comment. The other companies did not immediately respond to a request for comment.

The broker-dealers charged by the SEC admitted that staff exchanged personal messages about the businesses. The investment advisers confirmed employees used “off-channel communications” to discuss potential recommendations or advice, the regulator said. The misconduct, which included supervisors and senior managers, started from at least 2019.

The businesses failed to preserve the vast majority of these communications, which “likely deprived” the SEC of material for various investigations, the regulator said.

In addition to the penalties, the companies were ordered to not repeat record-keeping violations and retain independent compliance consultants.

Eleven Wall Street banks and brokers including Goldman Sachs, Morgan Stanley and Barclays last year agreed to pay more than $1.8bn in fines over charges of “widespread” and “longstanding” failures in their record-keeping practices.

Nine separate companies last month agreed to pay a total of $555mn in fines over similar violations.