While the U.S. Commodity Futures Trading Commission (CFTC) sanctioned yet another brokerage firm for its employees’ private texting, the U.S. Securities and Exchange Commission (SEC) went lightly on a firm that self-reported its own record-keeping failures.
The CFTC said it settled charges against introducing broker Piper Sandler Hedging Services LLC, ordering it to pay a US$2-million penalty, cease and desist from further violations, and tighten its compliance with the rules surrounding “off-channel communications.”
The firm admitted to violating the regulator’s record-keeping requirements and its own internal policies when employees used unapproved communication methods, including personal texting, and the firm failed to preserve those communications.
In mid-August the SEC sanctioned a related firm, Piper Sandler & Co., which agreed to pay a US$14-million penalty for its record-keeping violations.
Separately, the SEC also said on Monday that it charged investment adviser Atom Investors LP for violations stemming from its failure to preserve off-channel communications.
The SEC did not impose a penalty in the case because the firm self-reported the conduct, which it discovered when compiling its response to an investigative subpoena from the SEC, and promptly remediated the violations.
“This enforcement matter highlights the risk to investors when firms don’t comply with their record-keeping obligations: Because of Atom Investors’ longstanding failures to preserve required communications, including communications by Atom Investors’ senior personnel, we were hampered in our investigation into a third party,” said Gurbir Grewal, director of the SEC’s enforcement division.
Atom Investors agreed to settle the SEC’s charges without admitting or denying the regulator’s findings. In settling the case, Atom agreed to cease and desist from further violations of the securities laws and to be censured.
Grewal noted that the resolution in this case “shows that the full benefits of cooperation are available in record-keeping matters.”
“Atom Investors’ self-reporting and prompt remedial efforts weighed heavily in the enforcement division’s decision to recommend that the commission not impose a penalty, which the commission accepted,” he said. “This resolution should serve as a model for other investment advisers that are not currently in compliance with federal record-keeping requirements.”