The Securities and Exchange Commission (SEC) doled out significant penalties to five broker-dealers, three dually registered broker-dealers and investment advisers, and two affiliated investment advisors for “widespread and longstanding failures to maintain and preserve electronic communications.”
The firms admitted to the charges and acknowledged their conduct violated recordkeeping provisions of the federal securities laws. They agreed to pay combined penalties of $79 million and are taking steps to improve their compliance policies and procedures.
The monetary breakdown is as follows:
- Interactive Brokers Corp. and its affiliate Interactive Brokers LLC (together, Interactive Brokers) agreed to pay a $35 million penalty.
- Robert W. Baird & Co. Inc. agreed to pay a $15 million penalty.
- William Blair & Company LLC and affiliate William Blair Investment Management LLC (WBIM) agreed to pay a $10 million penalty.
- Nuveen Securities LLC agreed to pay an $8.5 million penalty.
- Fifth Third Securities Inc. agreed to pay an $8 million penalty.
The SEC emphasized the benefits of self-reporting, which resulted in a far smaller fine for Perella Weinberg Partners LP (Perella Weinberg), together with Tudor, Pickering, Holt & Co., and Perella Weinberg Capital. That amount was $2.5 million.
“One of the orders included in today’s announced actions is not like the others,” Gurbir Grewal, Director of the SEC’s Division of Enforcement, said in a statement. “There are real benefits to self-reporting, remediating, and cooperating.”
The SEC’s investigations uncovered “pervasive and longstanding off-channel communications at all 10 firms.”
The broker-dealers admitted that, from at least 2019, their employees communicated through personal text messages about their employers’ business, and the investment advisor firms admitted that their employees sent and received “off-channel” communications related to recommendations and advice given or proposed to be given.
The firms did not maintain or preserve most of these off-channel communications, violating the federal securities laws.
Interactive Brokers, Baird, William Blair, Nuveen, Fifth Third, Perella Weinberg, and TPH were each charged with violating certain recordkeeping provisions of the Securities Exchange Act of 1934 and failing to reasonably supervise to prevent and detect those violations.
Baird, William Blair, WBIM, Fifth Third, and Perella Weinberg Capital were each charged with violating certain recordkeeping provisions of the Investment Advisers Act of 1940 and with failing to reasonably supervise with a view to preventing and detecting those violations.
In addition to the significant financial penalties, each firm was ordered to cease and desist from future violations of the relevant recordkeeping provisions and was censured.
