Another U.S. advisory firm has been sanctioned for record-keeping violations stemming from its employees use of private messaging platforms.
The U.S. Securities and Exchange Commission (SEC) alleged that Senvest Management LLC failed to preserve extensive electronic communications and failed to enforce its own code of ethics requiring employees to pre-clear their personal trading activity.
Senvest settled the charges, admitting to the facts set out in the SEC’s order, including that employees at various levels of seniority used personal texting platforms and other private apps to communicate about company business, and agreed to pay a US$6.5-million penalty.
According to the order, senior personnel at the firm, who were responsible for preventing junior employees from engaging in private communications, were also engaging in work conversations on personal devices that were set to automatically delete messages after 30 days.
“The commission continues to focus on regulated entities’ compliance with the record-keeping requirements,” said Eric Werner, director of the regulator’s Fort Worth office, in a release. “Adherence to these requirements is essential for the commission to effectively exercise its regulatory oversight and enforce the federal securities laws.”
The SEC noted it requested records and subpoenaed documents from the firm during the time that employees were engaged in widespread off-channel communications, which may have impaired the regulator’s ability to investigate suspected violations.
Along with the monetary sanction, the firm agreed to improvements in its compliance policies and procedures.
In February, the SEC sanctioned several brokerage firms and investment advisers a combined US$81 million for violating industry record-keeping requirements when their employees used unapproved communications methods, such as private texting, to conduct business.