NEW YORK – The US Securities and Exchange Commission (SEC) is finalizing settlements with around two dozen Wall Street firms to resolve investigations into record-keeping lapses, said two people with knowledge of the matter.
The settlements with broker-dealers and investment advisers would mark the latest enforcement action in the SEC‘s two-year crackdown on Wall Street‘s use of WhatsApp and other unapproved messaging apps that has so far resulted in more than $2 billion in fines.
Under the deals being finalized with the SEC, the firms would pay fines, admit wrongdoing and commit to fixing the lapses, including by hiring independent consultants to overhaul their record-keeping programs, the two sources said. One said some firms could pay as much as $50 million.
The SEC is expected to announce some of the settlements in one group ahead of its fiscal year-end on Sept. 30, but the negotiations are fluid, said a third source familiar with the situation.
The sources, who spoke on the condition of anonymity because SEC investigations are confidential, said roughly two dozen firms are involved but Reuters could not immediately ascertain their names.
At least 16 broker-dealers and investment advisers have disclosed in regulatory filings that the SEC is probing their communications, including Truist Financial Corp., US Bancorp, Voya Financial Inc., LPL Financial, Interactive Brokers and Oppenheimer.
Fifth Third Bancorp said in an Aug. 7 SEC filing that it is “engaged in settlement negotiations” on the matter and did not anticipate a material impact on its financials.
Spokespeople for the SEC, Fifth Third, LPL, US Bancorp, Truist, Oppenheimer and Interactive Brokers all declined to comment. Voya did not respond to requests for comment.
The SEC has previously negotiated two other large group settlements as part of its “off-channel” communications probe.
The agency has so far brought 30 related enforcement actions, including with separate entities of the same group.
In August, regulators fined nine Wall Street firms, including Wells Fargo WFC.N and Societe Generale, a combined $549 million over employees’ use of personal messaging apps. In September 2022, it fined 16 firms, including Goldman Sachs, Morgan Stanley, Citigroup and Bank of America, $1.8 billion for similar lapses.
On Monday, Reuters reported that in the latest phase of the probe, the SEC has in recent month collected texts and other messages from more than a dozen investment advisers, including private equity and hedge funds, escalating its investigation.
Because companies do not keep a close watch on personal messaging channels, using them to discuss business puts SEC-regulated employers in breach of requirements to record all business communications.
The SEC began to home in on Wall Street‘s record-keeping problem when JPMorgan Chase failed to provide documents from at least 2018 pertaining to an unrelated probe, according to a 2021 settlement in which the bank agreed to pay the SEC $125 million to resolve charges over record-keeping lapses. – Reuters
