Wall Street regulators Tuesday hit broker-dealers with another round of hundreds of millions of dollars in penalties for failing to catch executives and traders using unofficial communications like WhatsApp.
But of the 11 firms that agreed to pay $289 million to settle the matter with the Securities and Exchange Commission, only one, Wedbush Securities Inc., had its wealth management operations cited directly in the settlement, with the SEC claiming "pervasive off-channel communications at all seniority levels of Wedbush’s broker-dealer and investment advisor."
Regulators have been taking firms to task over executives, bankers and traders communicating through various messaging platforms on their personal devices, including iMessage, WhatsApp and Signal, about the business of their employers.
Last September, regulators reached settlements with more than a dozen banks in a sprawling probe into how global financial firms failed to monitor employees’ communications on unauthorized messaging apps, bringing total penalties in the matter to more than $2 billion. Finance firms like broker-dealers are required to scrupulously monitor communications involving their business to head off improper conduct.
Los Angeles-based Wedbush Securities has 550 registered reps in 69 branch offices. The firm has had a history of failing to supervise certain trades that resulted in scrutiny from regulators and penalties.
"From at least January 2019, Wedbush broker-dealer personnel sent and received off-channel messages that concerned the broker-dealer’s business," according to the SEC. "During this period, Wedbush investment advisor personnel sent and received off-channel messages related to, among other things, providing and recommending investment advice to clients."
"In addition, from November 2021 to September 2022, an executive vice president in Wedbush’s wealth management division exchanged numerous off-channel business-related messages with at least nine Wedbush colleagues, personnel at other financial services firms, and market participants," according to the SEC.
Wedbush agreed to pay a penalty of $10 million.
A spokesperson for Wedbush Securities did not respond to a call seeking comment.
Meanwhile, three brokerage units at Wells Fargo & Co. Inc. agreed to pay $125 million to the Securities and Exchange Commission and BNP will pay $35 million, the regulator said Tuesday. Wells Fargo and BNP will each pay $75 million each over similar violations by their derivatives brokerage units, the Commodity Futures Trading Commission said.
"We’re pleased to resolve this matter," a Wells Fargo spokesperson wrote in an email.
In all, the CFTC announced penalties of $260 million, while the SEC said that firms had agreed to pay it $289 million.
Bloomberg News contributed reporting to this story.
A drop in interest rates and easier access to capital has reignited appetite among private equity-backed consolidators, who accounted for 53% of RIA deals so far this year- their highest share since 2021 according to Devoe & Company.
Also, Advisor CRM announces a new data integration partnership to ease the pain of client onboarding.
Meanwhile, Merrill Lynch intends to continue building its alternative investment platform for wealthy clients.
The co-founder of IFG discussed with InvestmentNews the unique opportunity that remaining independent offers to build a successful firm.
Three industry leaders will join the hybrid RIA's president and LPL alum, Andy Kalbaugh, to help guide its organic and merger-based growth strategy.
Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.
Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.
