HSBC, Scotia Capital Hit With SEC Text Message Fines
According to the SEC, neither firm “maintained or preserved the substantial majority of these communications, in violation of the federal securities laws.” The failings involved employees at multiple levels of authority, including supervisors and senior executives, the SEC said.
Both HSBC Securities and Scotia Capital cooperated with the SEC’s investigation by, among other things, self-reporting the recordkeeping failures after gathering communications from the personal devices of a sample of the firms’ personnel.
“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 Grewal, director of the SEC’s Division of Enforcement in a statement.
“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,” Grewal said.
The two firms’ supervisors routinely communicated off-channel using their personal devices.
Both 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.
In addition to the financial penalties, each firm was ordered to cease and desist from committing violations of the relevant recordkeeping provisions and was censured.
The firms also agreed to retain compliance consultants to, among other things, conduct comprehensive reviews of their policies and procedures relating to the retention of electronic communications found on personal devices and their respective frameworks for addressing non-compliance by their employees with those policies and procedures, the SEC said.
