This week, the U.S. Securities and Exchange Commission (SEC) has charged 12 municipal advisory firms for failing to maintain and preserve key electronic communications, resulting in over $1.3 million in combined civil penalties. The charges highlight that the SEC is increasingly focusing its attention on smaller financial firms.
The SEC emphasized the importance of proper recordkeeping for regulatory inspections, urging firms to reassess their communication surveillance practices in order to comply with their regulatory obligations. The charged firms admitted to the violations and are now improving their compliance policies.
Additionally, the SEC has encouraged any financial firm that believes its practices may not comply with federal securities laws to self-report to avoid potential penalties.
Rebecca Olsen, Deputy Chief of the SEC’s Division of Enforcement Public Finance Abuse Unit said:
“Municipal advisors are encouraged to assess their recordkeeping practices relating to off-channel communications. Firms that believe their practices do not comply with the securities laws are encouraged to self-report to the SEC’s Enforcement staff.”
This latest enforcement action serves as a clear warning to the industry that non-compliance with recordkeeping obligations will not be overlooked, reinforcing the SEC's commitment to maintaining transparency and accountability even within smaller financial firms.
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