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SEC Charges 26 Firms for Off-Channel Communications Violations

Enforcement Crackdown Continues

The Securities and Exchange Commission (SEC) has announced charges against 26 broker-dealers for violating recordkeeping provisions by using off-channel communication methods, such as text messages and WhatsApp, to conduct business.

Widespread Violations

The SEC's investigation revealed that all 11 firms engaged in “pervasive and longstanding” off-channel communications, including sending and receiving messages related to customer orders, recommendations, and other sensitive information.

Consequences

Each of the charged firms has acknowledged their wrongdoing and agreed to pay penalties as part of the settlement. To date, the SEC has charged over 40 registrants and imposed over $16 billion in penalties for off-channel communications violations.

Strong Enforcement

The SEC's enforcement actions demonstrate its commitment to enforcing recordkeeping requirements and protecting investors. The Commission continues to take a strict stance on off-channel communications, which can compromise the integrity of the markets and put clients' interests at risk.