The Securities and Exchange Commission said Monday that it has charged nine investment advisors and three broker-dealers for failures by the firms and their personnel to maintain and preserve electronic communications, including text messages, and levied a combined $63.1 million in civil penalties.
The firms admitted the facts set forth in their respective SEC orders, acknowledged that their conduct violated recordkeeping provisions of the federal securities laws and agreed to pay the fines, the SEC said.
The penalties involved using personal devices to communicate both internally and externally by text messages, and/or other unapproved written communication platforms, such as LinkedIn and Facebook Messenger.
The penalties are as follows:
- Blackstone Alternative Credit Advisors LP, together with Blackstone Management Partners L.L.C. and Blackstone Real Estate Advisors L.P.: $12 million
- Kohlberg Kravis Roberts & Co. L.P.: $11 million
- Charles Schwab & Co., Inc.: $10 million
- Apollo Capital Management L.P.: $8.5 million
- Carlyle Investment Management L.L.C., together with Carlyle Global Credit Investment Management L.L.C., and AlpInvest Partners B.V.: $8.5 million
- TPG Capital Advisors LLC: $8.5 million
- Santander U.S. Capital Markets LLC: $4 million
- PJT Partners LP, which self-reported: $600,000
The firms have begun implementing improvements to their compliance policies and procedures to address the violations.
“In order to effectively carry out their oversight responsibilities, the Commission’s Examinations and Enforcement Divisions must, and indeed do, rely heavily on registrants complying with the books and records requirements of the federal securities laws," said Sanjay Wadhwa, acting director of the SEC’s Division of Enforcement. "When firms fall short of those obligations, the consequences go far beyond deficient document productions; such failures implicate the transparency and the integrity of the markets and their participants, like the firms at issue here."
Each of the SEC’s investigations uncovered the use of unapproved communication methods, known as off-channel communications, at these firms, the agency said.
As described in the SEC’s orders, the firms admitted that, during the relevant periods, their personnel sent and received off-channel communications that were records required to be maintained under the securities laws. The failures involved personnel at multiple levels of authority, including supervisors and senior managers.
"We are pleased to resolve this immaterial matter and remain focused on delivering exceptional service and an outstanding experience to our clients," a Schwab spokesperson said.
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