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SEC Fines Target Off-Channel Communications

Posted on April 18th, 2024 at 2:15 PM
SEC Fines Target Off-Channel Communications

From the desk of Jim Eccleston at Ä¢¹½´«Ã½ 

The Securities and Exchange Commission (SEC) is ramping up its enforcement efforts targeting off-channel communications, particularly text messages, among investment advisory firms. Speaking at the recent Investment Adviser Association's compliance conference, former SEC attorneys predict that fines against investment advisors for such violations are on the horizon. 

ThinkAdvisor reports that off-channel communications remain a significant concern for the SEC, as highlighted by recent actions. In February, the SEC imposed fines totaling $81 million on 16 firms for using unapproved communication methods like texting. Those fines are part of a broader crackdown, with total penalties exceeding $3 billion.

The SEC's increased focus on off-channel communications has raised compliance challenges for investment advisory firms. Many firms are grappling with distinguishing between recordkeeping requirements for investment advisors and broker-dealers. While some SEC orders cite egregious behavior, such as using ephemeral messaging apps, the majority of violations involve innocuous activities like texting for convenience or due to the COVID-19 pandemic.

 

Ä¢¹½´«Ã½ LLC represents investors and financial advisors nationwide in securities, employment, transition, regulatory, and disciplinary matters.

Tags: eccleston, eccleston law, sec

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