Financial institutions have been reminded of their duty to ensure employees communicate through official channels when discussing business.
The US Securities and Exchanges Commission (SEC) handed 16 broker-dealers and investment advisers with hefty fines amounting to more than $81 million collectively.
According to the SEC, the penalties were issued for “widespread and longstanding failures by the firms and their employees to maintain and preserve electronic communications”.
DIGITAL: Spending time on social media
Operational due diligence: Communication breakdown
The accused firms have admitted their failures and haver agreed to pay their fines and implement an improved compliance process to address the violations.
The firms include Northwestern Mutual Investment Services, Guggenheim Securities and Huntingdon Investment Services.
“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,” said Gurbir S. Grewal, director of the SEC’s division of enforcement.
Financial firms have struggled to manage the risk of off-channel communications, especially since the global pandemic led to a worldwide move to working from home.
A 2023 study conducted by compliance firm Global Relay found that while 59% of surveyed firms had introduced social media bans for their employees, only 3% of compliance managers believed this ban would be effective.
