Senvest Management, a New York-based advisory firm with $3 billion in client assets, will pay $6.5 million to settle charges by the Securities and Exchange Commission that it failed to preserve off-channel electronic communications related to the business.
From January 2019 to December 2021, Senvest employees communicated about business matters via text and other platforms not approved by the firm, the SEC said. And the firm failed to maintain those communications.
Senvest employees sent and received thousands of business-related messages outside the channel during that period, including discussions between senior officers, managing directors and other employees. In one instance, three of the firm's senior officers and a managing director exchanged thousands of texts relating to the firm's business, including communications on specific securities recommendations to clients.
At least three senior officers set their personal devices to automatically delete messages after 30 days, meaning the firm and the commission can never see them. According to the commission, the firm received and responded to several requests and subpoenas during that period.
“The commission continues to focus on regulated entities' compliance with recordkeeping requirements,” SEC Fort Worth Office Director Eric Warner said of the charges. “Compliance with these requirements is essential for the commission to effectively exercise its regulatory oversight and enforce the federal securities laws.”
Senvest declined to comment for this story.
The SEC and other federal regulators are on a multi-year campaign penalizing financial firms for supervisory lapses related to out-of-channel electronic communications.
In September 2022, The SEC fined 15 b/d and a related investment adviser $1.1 billion in total to settle allegations of “widespread and long-standing” regulatory failures. The SEC argued that the firms violated record-keeping requirements, with employees (including those at senior levels) communicating via text messages and platforms such as WhatsApp.
The SEC decided the same allegations against HSBC in March 2023 and Wells Fargo and BNP Paribas SA in August of that year. IN September 2023, 10 signaturesincluding Interactive Brokers, Robert W. Baird & Co., William Blair & Company and Nuveen Securities, agreed to pay $79 million to settle allegations in similar matters.
SEC followed this group with 16 more in February, including Northwestern Mutual, Guggenheim Securities, Oppenheimer & Co., and Cambridge Investment Research. The firms collectively agreed to pay $81 million to settle similar charges.
In Senvest's order, the commission acknowledged that the firm made some remedial efforts before the settlement. The firm provided employees with firm-issued cell phones to reduce out-of-channel communications, and these devices automatically upload communications to a firm-wide filing system.
While Senvest neither admitted nor denied the allegations, it also agreed to a censure, a cease and desist, and to hire a third-party compliance consultant to “conduct comprehensive reviews of its policies and procedures” in relating to out-of-channel communications. on personal devices.