Wall Street investment advisers and broker-dealer traders are being required to pay US regulators more than $470 million as fines for violating record keeping rules. In a statement made last Wednesday, officials of the US SEC and of the Commodity Futures Trading Commission (CFTC) that a number of entities providing broker-dealer and investment advice as a service, have violated the record-keeping rules; particularly, pertaining to communications about work-related matters
The announcement of the penalties is actually the latest wave of a massive multi-year enforcement campaign against the use of text and WhatsApp messaging, which Wall Street insists are “off channel” work communications. However, SEC and CFTC maintain that text and WhatsApp messages do not meet the standard record-keeping requirement.
The group required to pay hefty amounts of penalty are the following:
- Epoch Investment Partners, to pay 75 million to the CFTC,
- Edward D. Jones & Co., L.P, Ameriprise Financial Services LLC. Raymond James & Associates, Inc, and LPL Financial to pay $50 million each to the SEC
Wall Street firms like RBC Capital Market, BNY Mellon Securities Corp., Pershing LLC, and TD Private Client Wealth LLC and Inc, as well as several others, will also pay lower but still hefty settlements for breaching the record-keeping requirement of the SEC and CFTC.
Reason Why the SEC Considers WhatsApp Messaging as Non-Compliant
The main reason why SEC does not approve of using text, particularly WhatsApp messaging is that information conveyed by way of the application can be shared for securities trading purposes. The sharing of information without proper disclosure is a material trading information violation of the record keeping provisions of the Securities Act of 1933 and also by the 1934 Securities Exchange Act.
The SEC’s authority to regulate and impose penalties is based on the provisions for such activity under the Securities Act of 1933 and the Securities Exchange Act of 1934.