Last year, the SEC imposed fines worth billions of dollars for violations of record-keeping requirements in banks' communications with their customers. It seems more firms are being targeted.
The Securities and Exchange Commission (SEC) has ordered some large hedge funds to review the personal cell phones of certain employees for evidence of trades made through unauthorized channels. Among those targeted are Steve Cohen's Point72 Asset Management, and Ken Griffin's Citadel, according to a «Bloomberg» story (behind paywall) citing sources.
Last year, the SEC imposed heavy fines on banks after months of investigations into a series of corresponding cases. A total of 16 financial companies, including Goldman Sachs, Bank of America, Citigroup, and Morgan Stanley, paid a total of $1.8 billion.
Communicating With Customers
Credit Suisse and UBS also had to pay $200 million each. Employees at each of the firms were accused of communicating with customers about business matters via chat programs and applications such as Whatsapp.
If customer contacts were conducted via the private devices of bank employees and not recorded accordingly, there were in violation of the banks' documentation obligations.
Unauthorized Channels
The hedge funds contacted by the SEC were asked to search the devices of certain employees for evidence of business dealings on unauthorized channels, the sources told «Bloomberg». The SEC is also investigating the practices of brokerage firms, asset managers, and private equity firms.
Reuters reported last October the SEC was looking to expand its investigation to other financial firms. From the SEC's perspective, the retention and documentation of communications between institutions and clients serve market integrity.
By imposing the fines, the authority wants to ensure communications about business matters are handled exclusively through official channels and be tracked accordingly.
