SEC and FINRA Impose Heavy Fines for Texting

The Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) have recently imposed significant fines on investment firms in New York, NY and Boca Raton, FL, for widespread compliance failures related to electronic communications and due diligence.

SEC Slaps RIA with $6.5M Penalty for Employee Text Message

A New York-based Registered Investment Advisor (RIA) has been charged with violating recordkeeping and ethics provisions of the Investment Advisers Act of 1940. The firm has been fined $6.5 million for its employees’ use of personal texting platforms and other non-compliant communications channels for business purposes. The violations, which occurred between January 2019 and December 2021, involved employees at various levels of authority, including senior staff.

FINRA Slaps $500,000 Fine on BD for Texting Supervision

Meanwhile, a Florida-based broker-dealer, and its CEO, have agreed to pay fines to FINRA for multiple compliance failures over the past decade. The firm failed to capture, retain, and review more than 10,900 business-related text messages sent or received by at least 27 associated persons, including the CEO himself, who accounted for 4,400 of these messages. The firm also had inadequate supervisory systems and procedures for conducting due diligence on private placement offerings.

These cases highlight the importance of adherence to recordkeeping and supervisory obligations in the financial industry. The SEC and FINRA continue to focus on regulated entities’ compliance with these requirements to ensure effective regulatory oversight and enforcement of federal securities laws.

As a result of these findings, both firms have been censured and ordered to cease and desist from future violations. They must also undertake measures to review and improve their policies, procedures, and supervisory systems to prevent such lapses from occurring in the future.

To read more about the first article, click here, for the second case, click here.