The U.S. Securities and Exchange Commission (SEC) is set to collect $63.1 million in fines from nine investment advisers and three broker-dealers over the use of unapproved communication methods.
The SEC says the 12 Wall Street firms violated recordkeeping statutes of federal securities laws after their employees, including supervisors and managers, used off-channel communication methods to send and receive messages.
The regulator also says the firms in question failed to “reasonably supervise their personnel” as they neglected to institute protocols that could have stopped or detected the use of unauthorized messaging platforms.
Among the firms charged by the SEC are financial services firm Charles Schwab, billion-dollar bank Santander and alternative asset management company Blackstone.
“Blackstone Alternative Credit Advisors LP, together with Blackstone Management Partners L.L.C. and Blackstone Real Estate Advisors L.P., agreed to pay a combined $12 million penalty;
Kohlberg Kravis Roberts & Co. L.P. agreed to pay a $11 million penalty;
Charles Schwab & Co., Inc. agreed to pay a $10 million penalty;
Apollo Capital Management L.P. agreed to pay a $8.5 million penalty;
Carlyle Investment Management L.L.C., together with Carlyle Global Credit Investment Management L.L.C., and AlpInvest Partners B.V., agreed to pay a combined $8.5 million penalty;
TPG Capital Advisors LLC agreed to pay an $8.5 million penalty;
Santander US Capital Markets LLC agreed to pay a $4 million penalty;
PJT Partners LP, which self-reported, agreed to pay a $600,000 penalty.”
On top of the monetary penalties, the SEC says the Wall Street firms have agreed to a censure and to cease and desist from further recordkeeping violations. The regulator adds that the companies are now in the process of revamping protocols to address gaps in compliance policies and procedures.
Says Sanjay Wadhwa, acting director of the SEC’s Division of Enforcement,
“In order to effectively carry out their oversight responsibilities, the Commission’s Examinations and Enforcement Divisions must, and indeed do, rely heavily on registrants complying with the books and records requirements of the federal securities laws.
When firms fall short of those obligations, the consequences go far beyond deficient document productions; such failures implicate the transparency and the integrity of the markets and their participants, like the firms at issue here.”
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