SEC fines HSBC and Scotia Capital over recordkeeping failures
The US Securities and Exchange Commission (SEC) has charged HSBC Securities and Scotia Capital for “widespread and longstanding failures by both firms and their employees to maintain and preserve electronic communications”.
The SEC says both firms admitted its employees “often communicated off-channel” about securities business matters on personal devices and via messaging platforms such as WhatsApp, with neither firm maintaining a record of the “substantial majority” of those conversations.
HSBC and Scotia Capital have acknowledged the SEC’s action and agreed to pay penalties of $15 million and $7.5 million respectively. The SEC adds both firms self-reported the violations after gathering communications from the personal devices of a sample of their employees.
“Both HSBC and Scotia Capital self-reported and self-remediated their recordkeeping violations, and the reduced penalties in these cases reflect their efforts and cooperation,” says Gurbir Grewal, director of the SEC’s division of enforcement.
“As we continue our efforts to ensure compliance with the Commission’s essential recordkeeping requirements, we encourage other firms to take note and likewise self-report.”
In addition to the penalties, both firms have agreed to retain compliance consultants and conduct reviews of their policies and procedures for retaining electronic communications on personal devices as well as their frameworks for addressing non-compliance.