Jeffrey A. Newman
The Securities and Exchange Commission announced charges against nine investment advisers and three broker-dealers for failures by the firms and their personnel to maintain and preserve electronic communications, in violation of recordkeeping provisions of the federal securities laws.
The firms admitted the facts set forth in their respective SEC orders, acknowledged that their conduct violated recordkeeping provisions of the federal securities laws, agreed to pay combined civil penalties of $63.1 million, as outlined below, and have begun implementing improvements to their compliance policies and procedures to address these violations. One of the firms, as noted below, self-reported its violations and, as a result, will pay significantly lower civil penalties than it would have otherwise.
- Blackstone Alternative Credit Advisors LP, together with Blackstone Management Partners L.L.C. and Blackstone Real Estate Advisors L.P., agreed to pay a combined $12 million penalty;
- Kohlberg Kravis Roberts & Co. L.P. agreed to pay a $11 million penalty;
- Charles Schwab & Co., Inc. agreed to pay a $10 million penalty;
- Apollo Capital Management L.P. agreed to pay a $8.5 million penalty;
- Carlyle Investment Management L.L.C., together with Carlyle Global Credit Investment Management L.L.C., and AlpInvest Partners B.V., agreed to pay a combined $8.5 million penalty;
- TPG Capital Advisors LLC agreed to pay an $8.5 million penalty;
- Santander US Capital Markets LLC agreed to pay a $4 million penalty;
- PJT Partners LP, which self-reported, agreed to pay a $600,000 penalty.
Each of the SEC’s investigations uncovered the use of unapproved communication methods, known as off-channel communications, at these firms. As described in the SEC’s orders, the firms admitted that, during the relevant periods, their personnel sent and received off-channel communications that were records required to be maintained under the securities laws. The failures involved personnel at multiple levels of authority, including supervisors and senior managers.
The firms were each charged with violating certain recordkeeping provisions of the Investment Advisers Act or the Securities Exchange Act. The firms were also each charged with failing to reasonably supervise their personnel with a view to preventing and detecting those violations.
In addition to the significant financial penalties, each of the firms was ordered to cease and desist from future violations of the relevant recordkeeping provisions and was censured.
Jeff Newman JD MBA, represents whistleblowers nationwide relating to customs and tariff fraud concerning imported Chinese goods as well as corporate whistleblowers in major claims under the False Claims Act (Qui Tam), and SEC, CFTC and FINCEN whistleblower programs. He can be reached at Jeff@JeffNewmanLaw.com or at 617-823-3217
