SEC Fines 12 Firms $63M for Failing to Maintain Proper Electronic Records

The SEC has charged nine investment advisers and three broker/dealers for violations of federal recordkeeping laws.

The Securities and Exchange Commission announced charges totaling $63 million against nine investment advisers and three broker/dealers for failing to maintain and preserve electronic communications.

In recent years, the SEC has intensified its scrutiny of recordkeeping practices across the financial industry. The broader regulatory focus on transparency comes amid growing use of electronic communications and off-channel methods.

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The 12 firms charged include:

  • Blackstone Alternative Credit Advisors LP, together with Blackstone Management Partners LLC and Blackstone Real Estate Advisors L.P., agreed to pay a combined $12 million penalty;
  • Kohlberg Kravis Roberts & Co. L.P., also known as KKR & Co., agreed to pay an $11 million penalty;
  • Charles Schwab & Co. Inc. agreed to pay a $10 million penalty;
  • Apollo Capital Management L.P. agreed to pay an $8.5 million penalty;
  • Carlyle Investment Management LLC, together with Carlyle Global Credit Investment Management LLC and AlpInvest Partners B.V., agreed to pay a combined $8.5 million penalty;
  • TPG Capital Advisors LLC agreed to pay an $8.5 million penalty;
  • Santander US Capital Markets LLC agreed to pay a $4 million penalty; and
  • PJT Partners LP, which self-reported, agreed to pay a $600,000 penalty.

The SEC charged the firms with violating recordkeeping provisions of the Investment Advisers Act or the Securities Exchange Act and failing to reasonably supervise personnel to prevent and detect these violations. The violations involved employees across multiple levels, including supervisors and senior managers.

“In order to effectively carry out their oversight responsibilities, the Commission’s Examinations and Enforcement Divisions must, and indeed do, rely heavily on registrants complying with the books and records requirements of the federal securities laws,” Sanjay Wadhwa, acting director of the SEC’s Division of Enforcement, said in a statement.

In addition to the financial penalties, the firms were ordered to cease and desist from future violations of relevant recordkeeping provisions, implement measures to improve their compliance policies and procedures, and accept censure from the SEC.

The firms involved have admitted to the violations and agreed to pay civil penalties, while committing to implement compliance improvements to address the shortcomings.

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