Piper Sandler Companies PIPR has agreed to pay a total civil penalty of $16 million to U.S. regulators for record-keeping failures. In order to settle investigations into its record-keeping practices, PIPR will pay $14 million to the Securities and Exchange Commission (“SEC”) and $2 million to the Commodity Futures Trading Commission (“CFTC”).
Because of the increasing use of off-channel communications like various messaging apps to discuss company business, it has become more difficult for broker-dealers and investment advisers to meet the record-keeping requirements.
Even though official communication channels generate automatically archived records, employees have increasingly resorted to unofficial platforms to evade scrutiny. While this practice helps conceal conversations, it jeopardizes regulatory compliance and the integrity of financial transactions.
Thus, the SEC regularly conducts investigations to ensure that Wall Street banks have been adequately logging employees' text messages and emails.
Regulators require banks to keep records of their staff communications, and typically ban the use of personal email, texts and messaging apps for work purposes.
In August 2023, a total of $549 million in penalties was levied against Wells Fargo WFC and several other financial institutions for their record-keeping lapses. The crackdown, led by the SEC and the CFTC, underlined the significance of keeping accurate records of employee communications in the financial industry.
At that time, the SEC's action revealed a pattern of "widespread and longstanding failures" in record-keeping by 11 firms, resulting in charges and fines aggregating to $289 million. Then again, the CFTC imposed a fine of $260 million on four banks for failing to adhere to the agency's record-keeping requirements.
Wells Fargo had incurred the highest penalty among the firms targeted, amounting to $200 million.
Last year, the CFTC also charged Goldman Sachs GS with a civil penalty of $5.5 million. The CFTC’s order required GS to cease and desist from committing future violations of the Commodity Exchange Act and the CFTC’s record-keeping provisions.
Per the CFTC’s findings, GS violated the provisions of a previous order, and failed to appropriately record and retain certain audio files.
Notably, these penalties levied by regulators serve as a stark reminder to financial institutions about the importance of adhering to record-keeping requirements. The fines underscore regulators' commitment to ensuring transparency and accountability within the financial sector, and they send a clear message to firms to promptly address communication compliance gaps to avoid similar repercussions in the future.
Over the past six months, PIPR shares have gained 32.1% compared with the industry’s 8% growth.
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Currently, PIPR carries a Zacks Rank #4 (Sell).
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