Ten Wall Street businesses, including Perella Weinberg Partners and Interactive Brokers, have agreed to pay a total of $79 million to the US Securities and Exchange Commission (SEC) as part of penalties related to messaging by employees on platforms such as WhatsApp. The SEC charged these broker-dealers and investment advisers for their failure to maintain and preserve electronic communications. This move by the SEC is the latest in a series of enforcement actions against Wall Street’s messaging practices, forcing banks to review their messaging policies and let go of some employees. The companies charged have admitted to the SEC’s findings and acknowledged that they violated US securities laws.
Interactive Brokers Corp and an affiliate faced the highest penalty of $35 million, in addition to a $20 million fine from the Commodity Futures Trading Commission for similar violations. The SEC’s probe of Interactive Brokers revealed pervasive off-channel communications at all seniority levels, including a group head engaging in business conversations via text messages and WhatsApp with at least 32 employees. Other companies such as Robert W Baird & Co, William Blair & Company, Nuveen Securities, and Fifth Third Securities also agreed to pay penalties ranging from $10 million to $15 million.
In addition to the financial penalties, the businesses were ordered by the SEC to refrain from repeating record-keeping violations and to retain independent compliance consultants. The SEC stated that the failure of these companies to preserve the majority of their communications likely deprived the regulator of essential material for various investigations. This comes after last year’s agreement by eleven Wall Street banks and brokers, including Goldman Sachs, Morgan Stanley, and Barclays, to pay over $1.8 billion in fines over failures in their record-keeping practices. Furthermore, nine separate companies last month agreed to pay a total of $555 million in fines for similar violations.