The Securities and Exchange Commission announced that it has charged two registered broker-dealers with violating certain record-keeping requirements of the federal securities laws.
The SEC’s press release said that HSBC Securities Inc. (HSBC) and Scotia Capital (USA) Inc. acknowledged the misconduct and agreed to pay penalties of $15 million and $7.5 million respectively to settle the charges. The two firms were accused of “widespread and longstanding failures” to maintain and preserve their off-channel electronic communications.
According to the SEC, HSBC and Scota Capital admitted that employees often communicated off-channel regarding securities business matters on their personal devices, using messaging platforms such as WhatsApp. The substantial majority of the communications were not preserved or maintained by either firm, the commission said.
HSBC and Scotia Capital both were said to have cooperated with the SEC’s investigation and self-reported the recordkeeping failures when they gathered communications from some of their employee’s personal devices.
“Today’s actions should not only remind firms of the importance of following SEC recordkeeping requirements, but also the value of disclosing violations when they do occur,” said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement. “Both HSBC and Scotia Capital self-reported and self-remediated their recordkeeping violations, and the reduced penalties in these cases reflect their efforts and cooperation. As we continue our efforts to ensure compliance with the Commission’s essential recordkeeping requirements, we encourage other firms to take note and likewise self-report.”
The SEC said employees at multiple levels of authority, including senior executives and supervisors, were involved in the violations. The two firms were charged with violating certain recordkeeping provisions of the Securities Exchange Act of 1934 and with failing to reasonably supervise with a view to preventing and detecting those violations.
Along with the financial penalties, HSBC and Scotia Capital were censured and ordered to cease and desist from further violations of the recordkeeping provisions. The two firms also agreed to have compliance consultants review their policies involving retaining electronic communications found on personal devices.
The attorneys at Lewitas Hyman include former senior attorneys at the SEC whose legal experience and industry knowledge make them uniquely qualified to provide counsel on securities regulatory, compliance and enforcement matters. When it comes to regulatory compliance and enforcement matters, our attorneys have dealt with investigations and enforcement actions stemming from allegations including violations of SEC, FINRA, and SRO rules and regulations. If your firm is facing an investigation from a regulatory agency, please contact Lewitas Hyman at (888) 655-6002 or through our online contact form.