National investment loss lawyers KlaymanToskes reports that the SEC and FINRA have ordered a dozen of financial services companies, including major Wall Street firms, to pay more than $2.5 billion in fines for their use of “Off-channel” communication channels such as Whatsapp and other personal messaging platforms.
Investors that suffered losses due to their broker/advisor’s use of off-channel communications and/or other securities violations should contact attorney Lawrence L. Klayman, Esq., at 888-997-9956, or lawrence@klaymantoskes.com for a free consultation to learn about recovery options. We do not collect attorney’s fees unless we are able to obtain a financial recovery for you.
The Securities and Exchange Commission (“SEC”) and Commodity Futures Trading Commission (“CFTC”) have recently fined the following 11 firms over $555 million for widespread and long standing failures by the firms and their employees to maintain and preserve electronic communications:
The SEC’s investigation found that employees at all 11 firms engaged in longstanding “off-channel” communications, including the use of messaging platforms on personal devices, such as iMessage, WhatsApp, and Signal, about the business of their employers.
The firms allegedly failed to maintain or preserve the majority of these off-channel communications, in violation of the federal securities laws. The SEC found that the violations “involved employees at multiple levels of authority, including supervisors and senior executives.”
Fines related to financial services firms’ use of off-channel communication methods have reportedly reached over $2.5 billion since regulators began cracking down on firms’ alleged failures in supervising employee communications in recent years.
In 2021, JPMorgan settled charges related to its employees’ use of off-channel communications with the SEC and CFTC for $200 million. The firm also agreed to implement improvements to its compliance policies and procedures to settle the matter.
In September 2022, the SEC and CFTC charged 16 firms with widespread record-keeping failures for a total of $1.1 billion in combined penalties. The following eight firms agreed to pay penalties of $125 million each:
Combined with this week’s $555 million in fines against 11 firms, regulators have hit financial services companies with over $2.5 billion in off-channel communication-related fines since the end of 2021.
According to public records, the amount in regulatory related fines may continue to rise, as the following firms have reportedly also been queried by regulators regarding their use of unofficial channels:
Regulatory filings and other public records show that regulators have probed the above firms for various violations related to off-channel communications. While a regulatory inquiry aimed at collecting information does not necessarily indicate an imminent enforcement action, certain filings highlight that this investigation encompasses a “sweep” of the entire industry, and virtually all firms have affirmed their cooperation.
Brokers and investment advisors are responsible for retaining any communications relevant to their business operations to avoid any potential misconduct. The failure to do so, according to regulators, hampers the investigation of any potential wrongdoing. This task is reportedly further complicated when financial professionals use communication tools that automatically erase messages.
The SEC has reported that its investigation has unveiled the prevalence of off-channel communication use at several major Wall Street brokerage firms, indicating a broader scope rather than isolated incidents. Further, at certain firms, the SEC’s findings implicate senior managers, including group leads, managing directors, and senior supervisors responsible for overseeing junior firm members.
Investors that suffered losses due to their broker/advisor’s use of off-channel communications and/or other securities violations should contact attorney Lawrence L. Klayman, Esq., at 888-997-9956, or lawrence@klaymantoskes.com for a free consultation to learn about recovery options. We do not collect attorney’s fees unless we are able to obtain a financial recovery for you.
KlaymanToskes is a leading national securities law firm which practices exclusively in the field of securities arbitration on behalf of retail and institutional investors throughout the world in large and complex securities matters. The firm has recovered over $250 million in FINRA arbitrations and over $350 million in other securities litigation matters. KlaymanToskes has office locations in California, Florida, New York, and Puerto Rico.
KlaymanToskes, P.A.
Lawrence L. Klayman, Esq.
888-997-9956
lawrence@klaymantoskes.com
www.klaymantoskes.com