Money

SEC fines U.S. Bancorp and 15 others $81M for record-keeping failures

  • SEC charges 16 financial companies for inadequate electronic communication maintenance
  • Companies to pay over $81 million in civil penalties
  • Regulator highlights the use of “off-channel” communications
  • Record-keeping requirements essential for monitoring and enforcing compliance with securities laws

Introduction

The Securities and Exchange Commission (SEC) has taken action against 16 financial companies for failing to properly maintain and preserve electronic communications. As a result, these companies have agreed to pay a total of more than $81 million in civil penalties. The charges stem from the use of “off-channel” communications, such as personal text messaging services, by employees to discuss clients and business transactions instead of official company platforms.

Main Content

Record-Keeping Failures and Penalties

The fined companies include U.S. Bancorp’s investment subsidiary, Oppenheimer & Co. Inc., three Northwestern Mutual entities, Guggenheim Securities and Guggenheim Partners Investment Management LLC, Cambridge Investment Research Inc. and Cambridge Investment Research Advisors Inc., two KeyCorp subsidiaries, and two Lincoln National Corp. subsidiaries. Additionally, three Huntington Bank subsidiaries were also charged.

Gurbir S. Grewal, director of the SEC’s enforcement division, emphasized that the penalties are part of ongoing efforts to ensure compliance with record-keeping requirements. He stated, “Today’s actions against these 16 firms result from our continuing efforts to ensure that all regulated entities comply with the recordkeeping requirements, which are essential to our ability to monitor and enforce compliance with the federal securities laws.”

Importance of Record Keeping

The SEC views record keeping as a vital tool in its mission to enforce securities laws. By maintaining proper records, the regulator can effectively monitor and investigate potential violations. This multiyear effort to crack down on off-channel communications began with a $125 million fine against JPMorgan Securities in 2021.

Huntington Bank’s Cooperation

Grewal highlighted that Huntington Bank’s smaller penalty of $1.25 million reflects its voluntary self-report and cooperation. This demonstrates the SEC’s recognition of companies that take proactive measures to rectify their record-keeping failures.

Conclusion

The SEC’s recent charges and penalties against 16 financial companies for record-keeping failures serve as a reminder of the importance of maintaining and preserving electronic communications. With fines totaling over $81 million, the regulator aims to ensure compliance with record-keeping requirements and enforce securities laws. Companies must prioritize the use of official platforms for business communications to avoid potential penalties and maintain transparency in the financial industry.

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