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September 29, 2023 at 10:26 AM
What You Need to Know
- Actions involved the firms' employees communicating both internally and externally by personal text messages.
- The firms agreed to pay combined penalties of $79 million and have begun implementing improvements.
- The firms did not maintain or preserve the substantial majority of these off-channel communications.
The Securities and Exchange Commission said Friday that it has charged more firms with failures to preserve electronic communications on WhatsApp and GroupMe.
The recordkeeping violations were levied against five broker-dealers, three dually registered broker-dealers and investment advisors, and two affiliated investment advisors for “widespread and longstanding failures to maintain and preserve” electronic communications.
The actions announced Friday are part of the SEC’s ongoing crackdown on Wall Street’s use of WhatsApp and other messaging apps.
The SEC’s investigations announced Friday uncovered “pervasive and longstanding off-channel communications” use at all of the firms.
The following firms agreed to pay combined penalties of $79 million and have begun implementing improvements to their compliance policies and procedures to address these violations:
- Interactive Brokers Corp. and 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; and
- Perella Weinberg Partners LP (Perella Weinberg), together with Tudor, Pickering, Holt & Co. Securities LLC (TPH) and Perella Weinberg Partners Capital Management LP (Perella Weinberg Capital), which self-reported, agreed to pay a $2.5 million penalty.
The actions involved the firms’ employees communicating both internally and externally by personal text messages, or other text messaging platforms such as WhatsApp and GroupMe. The Commodity Futures Trading Commission ordered Interactive Brokers to pay a $20 million civil monetary penalty the same day for related conduct.
“One of the orders included in today’s announced actions is not like the others,” said Gurbir Grewal, director of the SEC’s Division of Enforcement. “There are real benefits to self-reporting, remediating and cooperating.”
As described in the SEC’s orders, “the broker-dealer firms admitted that, from at least 2019, their employees communicated through personal text messages about the business of their employers, and the investment adviser firms admitted that their employees sent and received off-channel communications related to recommendations made or proposed to be made and advice given or proposed to be given.”
