Case Studies
Over the past few years, the Securities Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) have been focusing their efforts (among other things) on ensuring that applicable regulated entities within their jurisdiction comply with established recordkeeping requirements as they pertain to unauthorized communications by their employees (commonly known as off-channel communications). These requirements have been deemed essential to the agencies’ ability to monitor and enforce compliance with applicable federal laws.
The agencies have predominantly examined for compliance via sweep examinations where they have targeted certain broker-dealers, investment advisers, credit agencies, or futures commission merchants, sending written requests for information and documents. Many of these investigations have uncovered pervasive and longstanding uses of unapproved communications.
In addition to significant financial penalties, each firm was ordered to cease and desist from future violations of the relevant recordkeeping provisions and was censured. The firms also agreed to retain independent compliance consultants to, among other things, conduct comprehensive reviews of their policies and procedures relating to the retention of electronic communications found on personal devices and their respective frameworks for addressing non-compliance by their employees with those policies and procedures.
Our client was one of the broker-dealers subject to an SEC enforcement action. Due to an existing relationship, our client asked J.S. Held to be considered to act as an Independent Compliance Consultant (ICC) pursuant to the requirements laid out in the settlement with the SEC. Ultimately, J.S. Held was chosen to act as our client’s ICC.
J.S. Held conducted a thorough review of our client’s current electronic communication program, including framework, implementation, record retention, and supervision. These reviews validated the strength of the program in limiting risk to our client while meeting its regulatory obligations.
Our reviews found areas where our client’s programs could be enhanced to supplement existing policies and implementation methods. While mindful of the practical resource limitations that shape any compliance program, the recommendations were made to be practical and achievable.
Pursuant to the settlement agreement, our report was submitted to the SEC. An additional review will be conducted, and a subsequent report will be submitted to the SEC in one year.
Stephen Strombelline
Vice President
Global Investigations
+1 224 263 7835
[email protected]
> Corporate Governance & Regulatory Compliance
Our team assists clients facing multi-jurisdictional regulatory inquiries, government investigations, and internal compliance challenges by helping them design, implement, monitor, and enhance effective compliance policies and programs. We leverage our regulatory, technology, and investigative expertise to provide clients with a 360-degree view of their operations to help adapt to ever-changing regulatory requirements and manage emerging data sources and technologies.
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J.S. Held’s global investigations team provides companies, legal counsel, financial institutions, government agencies, and high-profile individuals with the information required to make well-informed business and legal decisions. Our team is retained to advise in multijurisdictional regulatory inquiries and investigations, compliance issues, business transactions, and legal proceedings.