The Securities and Exchange Commission fined 16 financial firms, including units of U.S. Bank, KeyBank and Huntington Bank, a total of $81 million as part of the regulator’s ongoing probe into off-channel communications and record-keeping, the agency announced Friday.
The 16 firms fall under the umbrella of eight parent companies, and encompass various categories of broker-dealers and investment advisers. Penalties range from $16.5 million for Northwest Mutual to $1.5 million for Huntington. The SEC noted that Huntington’s penalty reflected that the bank self-reported its violation and cooperated in the investigation.
Notably, KeyBank’s investment services unit and capital markets unit, collectively, will pay $10 million. U.S. Bank’s investments unit, meanwhile, will pay $8 million.
KeyBank and U.S. Bank each warned investors in November that they were engaged in “settlement negotiations” or “resolution discussions” regarding what’s sometimes called the WhatsApp probes.
The affected broker-dealers admitted that, from at least 2019 or 2020, their employees communicated through personal text messages about company business, the SEC said.
The investment advisers, meanwhile, admitted that their employees sent and received off-channel communications related to recommendations made or proposed to be made and advice given or proposed to be given, according to the regulator.
The SEC ordered each firm to cease and desist from future similar record-keeping violations of the relevant provisions. The firms also agreed to retain independent compliance consultants to review their policies regarding record-keeping.
Penalties resolving this round of WhatsApp investigations — at least the fourth involving multiple firms since 2021 — are lower than previous announcements involving larger banks. Among Friday’s penalties, Guggenheim agreed to pay $15 million; Oppenheimer agreed to pay $12 million; Cambridge agreed to pay $10 million; and Lincoln agreed to pay $8.5 million. By comparison, Wells Fargo — when it was hit in the last major WhatsApp round in August — was fined $200 million.
The crackdown on off-channel communications began in earnest in December 2021, when JPMorgan Chase agreed to pay $200 million. Penalties continued in September 2022, when 11 Wall Street banks and brokerages, including Bank of America, Barclays, Citi, Credit Suisse, Deutsche Bank, Goldman Sachs, Morgan Stanley and UBS, agreed to pay more than $1.8 billion in fines. Fifth Third Bank agreed to pay an $8 million penalty to the SEC in a one-off announcement in November.
The Commodity Futures Trading Commission has also typically announced off-channel communications penalties in tandem with the SEC. Friday’s round encompassed just the SEC.
“Today’s actions against these 16 firms result from our continuing efforts to ensure that all regulated entities comply with the record-keeping requirements, which are essential to our ability to monitor and enforce compliance with the federal securities laws,” Gurbir S. Grewal, director of the SEC’s Division of Enforcement, said Friday.
