- Chief Compliance Officer and VP of Legal Affairs, Arrow Electronics
The Securities and Exchange Commission’s (SEC) and Commodity Futures Trading Commission’s (CFTC) crack down on recordkeeping failures by financial services firms regarding employee use of off-channel communications for business purposes began in December 2021 and hasn’t shown any signs of slowing since.
The agencies have combined to levy about $3.2 billion in penalties against firms and their affiliates in response to the violations. Firms have admitted their failures and been required to retain independent compliance consultants to review their off-channel communication recordkeeping policies and procedures and how they address noncompliance by employees.
The below table summarizes the SEC’s and CFTC’s enforcement activities regarding off-channel communications. Violations by affiliates have been accounted for under their parent companies for presentation purposes.
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Two regulators doled out more than $477 million in fines on a new group of broker-dealers, investment advisers, and swaps dealers that failed to maintain and preserve the electronic communications of their employees, bringing total such fines issued since 2021 to $3.2 billion.
Ameriprise Financial disclosed it recorded a $50 million accrual related to the resolution of a Securities and Exchange Commission probe into use of off-channel communications by its employees for conducting business.
The ongoing off-channel communications sweep by the Securities and Exchange Commission netted 16 more broker-dealers and investment advisers, with the latest wave of fines totaling more than $81 million.
Illinois-based manufacturer John Deere will pay approximately $10 million in penalties and disgorgement to the Securities and Exchange Commission for violating the Foreign Corrupt Practices Act with bribes paid by a Thai subsidiary.
Nine investment advisers will pay a total of $1.24 million to settle allegations that they violated the Securities and Exchange Commission’s marketing rule by disseminating advertisements with untrue or misleading information.
A privately held family company and its CEO, who announced a $10 billion bid to buy U.S. Steel without having the cash on hand, will pay $600,000 in penalties to the Securities and Exchange Commission for making materially false statements.
