April 20, 2024

Fraud Analysis

The U.S SEC fines $1.1bn to Wall Street firms for not adhering to the recordkeeping provisions.

The Securities and Exchange Commission (SEC) has fined 16 Wall Street firms for long-term non-maintenance of electronic communication which is a violation of U.S federal securities law. Fifteen brokers and one advisor have agreed to pay the penalty of $1.1bn for violating the recordkeeping law of the Securities Exchange Act of 1934.

The U.S SEC observed that in the time between January 2018 to September 2021, the employees regularly used messaging platforms on their personal devices and discussed confidential business matters. Most of these offline communications were not preserved or maintained, which is a violation of federal securities laws, the SEC alleges.

Gary Gensler, Chair SEC, remarked that books-and-records obligations are important to maintain market integrity. Gensler further adds, with the change of technology, it’s even more vital that registrants must conduct their business communications in an appropriate manner using official channels, and they must keep a record of the communications.

An amount of $125million will be paid as a penalty by 8 firms and 5 affiliates. These include Citigroup Global Markets, Morgan Stanley (as well as MSSB), Citigroup Global Markets, Bank of America Securities, Deutsche Bank Securities (as well as two affiliates), Barclays Capital, UBS Securities (and UBS Financial Services), Goldman Sachs. The other firms, Nomura and Jefferies Securities, will pay $50 million each. Cantor Fitzgerald is willing to pay $10 million as penalty.

Apart from the penalties mentioned above, these firms have also agreed to revise and boost their procedures and compliance policies.

Gurbir Grewal, director of the SEC’s division of enforcement, comments that recordkeeping is inviolable.He further adds that when wrongdoing or misconduct is suspected the company’s records need to be thoroughly checked to see what went wrong and where.

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