The Securities and Exchange Commission and the Commodity Futures Trading Commission levied another $475 million in fines against broker-dealers, investment advisers and commodities firms. Ameriprise, Edward D. Jones, LPL and Raymond James each paid a $50 million fine. Millions in fines because firm employees were texting with clients and business partners.
The order against P. Schoenfeld Asset Management LP provided some insight on the SEC’s approach toward investment advisers and fund managers. PSAM is registered as an investment adviser. It is not broker-dealer or dually registered as a BD-IA.
The SEC points out four areas of records that are required under the IA record-keeping requirements:
(a) any recommendation made or proposed to be made and any advice given or proposed to be given;
(b) any receipt, disbursement, or delivery of funds or securities;
(c) the placing or execution of any order to purchase or sell any security; or
(d) predecessor performance and the performance or rate of return of any or all managed accounts, portfolios, or securities recommendations.
PSAM’s policy was that ’employees were “prohibited from conducting PSAM business using any other electronic communication services . . . or accounts not provided by PSAM”’. That is probably broader than the SEC record-keeping rule requires.
Even with its stricter policy, PSAM appears to have breached the record-keeping requirements. The Order refers to “pervasive off-channel communications.” The SEC examiners found records in these other platforms that were required to be retained. As an example, off-channel communications were sent to and from PSAM clients, counterparties, and other financial industry participants.
It sounds to me like SEC examiners looked at personal devices.
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