SMS Message Rates May Apply: SEC Fines 16 Firms $81 Million for Recordkeeping Failures

On Friday, the U.S. Securities and Exchange Commission (SEC) announced that it settled charges with 16 investment advisers and broker-dealers alleging that the firms failed to maintain required electronic records. These actions are the latest in the Commission's ongoing campaign on off-channel communications that has shown no signs of slowing down since it began in December 2021.

Of note in the announcement, the order calls out the significant consideration afforded to one of the 16 firms that self-reported to the SEC. That firm was fined a relatively modest $1.25 million as compared to the other 15 firms whose fines ranged from $8 million to $16.5 million.

Our Guidance

Firms should look to proactively strengthen their compliance program around off-channel communications in an effort to minimize examination deficiencies and avoid enforcement action.

1. Make sure your firm is capturing communications on all channels where your policies allow business communications and is testing for indicators of unapproved channels being leveraged.
    
2. Engage a third-party for enhanced electronic communications surveillance capabilities, risk-based testing, and training.
    
3. Provide training. Training should cover permitted and prohibited methods of communication, technology used to capture and retain required communications, policies for inadvertent use of prohibited channels, reporting, and certification.
    
4. Use certifications and attestations as frequently as quarterly. 

Read our blog here for our 7 Proactive Steps to Prepare for Regulatory Scrutiny of Off-Channel Communications.

Additional Resources

• Webcast: Tech-Enablement of Your Off-Channel Communication Surveillance
• Webcast: Off-Channel Communications – What’s All the Fuss About?
• On-Demand Demo: eComms Surveillance Solution Demo 

How We Help

ACA can support you to take the crucial steps forward to help your firm be prepared when the regulators come knocking. Our Managed Services and eComms Surveillance Solution in ComplianceAlpha^® are designed to help you manage firm-wide risk in a way that meets regulatory expectations and industry best practices.

ACA's ComplianceAlpha eComms Surveillance Solution is an integrated surveillance and investigations platform ranging from fundamental books and records archiving through to the ongoing supervision of electronic communications. This solution provides firms with an automated platform to surface potentially high-risk activities and behaviors, powered by an underlying communications archive solution that captures and retains pertinent electronic and voice communications from across an organization.

This offering is a Software as a Service (SaaS) solution that can be tailored to a firm’s particular compliance needs through a robust policy library which has been validated against multiple regulatory bodies. The company’s internal team can be trained by ACA’s functional experts on how to run the system on their own, as required for their firm – all while being supported with rigorous documentation. Global firms can conduct multilingual surveillance, leveraging our Natural Language Processing (NLP) engine to detect and analyze content across multiple languages.

Our Managed Services team of electronic communications analysts and consultants are available for project-based or ongoing support to assist with peer benchmarking and best practices around this evolving landscape. Our experts can help identify whether current polices and electronic communications monitoring practices are effective and appropriate for your firm. Currently supporting over 1,200 clients globally, our team helps to ease capacity and expertise concerns as firms enhance their programs and aim to keep pace with regulatory tailwinds.

If you have any questions or would like to discuss how ACA can help your firm strengthen its surveillance program, increase efficiencies through technology, and ensure that your regulatory obligations are met, please contact us here.

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