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SEC, CFTC to Collect $474M in Latest Texting Probe Fines

Piper Sandler to Pay $16 Million as Part of Settlement

Over 470 million in penalties have been handed down to broker-dealers and investment advisors.

Piper Sandler has agreed to pay a civil penalty of $16 million to US Regulators to settle investigations into its record-keeping practices. The Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) announced the settlement on August 14, 2024.

The SEC's order found that Piper Sandler violated federal securities laws by failing to maintain and preserve electronic communications, including text messages, relating to its business. The CFTC's order found that Piper Sandler violated the Commodity Exchange Act and CFTC regulations by failing to supervise its employees' use of personal devices to conduct business-related communications.

In addition to the civil penalty, Piper Sandler has agreed to retain an independent consultant to review its compliance with record-keeping requirements. The consultant will make recommendations to Piper Sandler on how to improve its compliance program.

The SEC and CFTC have been investigating the use of text messaging and other electronic communications by broker-dealers and investment advisors for several years. The agencies have found that many firms are not adequately supervising their employees' use of these communications channels, which can lead to the loss of important business records.

The settlements with Piper Sandler and the other firms are a reminder that the SEC and CFTC are taking a tough stance on firms that fail to comply with record-keeping requirements. Firms should take steps to ensure that they have adequate policies and procedures in place to supervise their employees' use of electronic communications.

Conclusion

The SEC and CFTC's latest enforcement actions are a clear signal to the industry that they are serious about enforcing record-keeping requirements. Firms that fail to comply with these requirements face significant financial penalties and other sanctions.