SEC’s latest recordkeeping fines show net widening, focus on compliance basics

The US Securities and Exchange Commission’s (SEC) latest recordkeeping fines show it has widened its net beyond Tier 1 banks and will continue to focus on compliance basics in 2025. The Wall Street watchdog fined 12 firms a total of $63 million yesterday for failures to maintain and preserve electronic communications.

It is a trend that will continue, predicted Matt Smith, chief executive at SteelEye, an integrated communications and trade surveillance provider in London.

While the change in US administration might mean the intensity of enforcement action could shift, the onus on firms to keep records was a constant, he said. “Those [firms] that fail to do so can expect this watchdog to bite. It will come down hard on firms of all sizes and specialities, whether you’re a global Tier 1 bank, a nimble broker-dealer or specialist investment advisor.”

The SEC press release also underlined firms’ use of messaging apps for off-channel communications that should have been recorded but were not. Recordkeeping failures are more than paperwork mistakes, and affect market integrity, said Sanjay Wadhwa, acting director of SEC enforcement. 

“When firms fall short of those obligations, the consequences go far beyond deficient document productions. Such failures implicate the transparency and the integrity of the markets and their participants, like the firms at issue here,” he added.

In addition to the financial penalties, each of the firms was ordered to cease and desist from future violations of the relevant recordkeeping provisions and was censured, the SEC said.

Most frequent control failure in 2024

Recordkeeping failures were the most frequent reason for systems and control penalties in 2024, and accounted for roughly $500 million in US fines, Compliance Corylated found. The SEC and the Commodity Futures Trading Commission (CFTC) began penalising firms for recordkeeping violations, particularly for off-channel communications, in September 2022, and have since fined firms billions.

“By failing to honour their recordkeeping and books-and-records obligations, the market participants we have charged today have failed to maintain that trust,” said Gary Gensler, departing SEC chair in 2022.

“Since the 1930s, such recordkeeping has been vital to preserve market integrity. As technology changes, it’s even more important that registrants appropriately conduct their communications about business matters within only official channels, and they must maintain and preserve those communications,” he said.