The Securities and Exchange Commission (SEC) just handed down a hefty $63.1 million fine to twelve major financial firms for violating recordkeeping rules. These firms, including big names like Charles Schwab and Santander, were caught using unauthorized communication methods for business.
Off-Channel Communication Leads to Big Trouble
The SEC says these firms—nine investment advisors and three broker-dealers—allowed their employees to use personal messaging apps and other unapproved channels to discuss business. This broke federal securities laws requiring proper record-keeping. The SEC also criticized the firms for failing to properly supervise their employees and implement systems to prevent this kind of off-channel communication.
Who Paid the Price?
The fines varied depending on the firm’s size and involvement:
- Blackstone (various entities): $12 million
- Kohlberg Kravis Roberts: $11 million
- Charles Schwab: $10 million
- Apollo Capital Management: $8.5 million
- Carlyle Investment Management (various entities): $8.5 million
- TPG Capital Advisors: $8.5 million
- Santander US Capital Markets: $4 million
- PJT Partners: $600,000
In addition to the fines, the firms also received a formal rebuke and were ordered to stop the recordkeeping violations. They’re now working on improving their compliance procedures.
SEC’s Message: Transparency Matters
SEC Acting Director of Enforcement, Sanjay Wadhwa, emphasized the importance of compliance with recordkeeping rules. He stated that these violations undermine market transparency and integrity. The SEC’s action sends a clear message that proper record-keeping is crucial for maintaining trust in the financial system.
