Sanjay Wadhwa, acting director of the Securities and Exchange Commission's Division of Enforcement, explained the scope of the agency's "ongoing" off-channel communications crackdown and described how the securities regulator goes about assessing fines.
No recent enforcement initiative "has gotten more attention than our ongoing off-channel communications initiative, colloquially known as the WhatsApp initiative," Wadhwa said Thursday at the Securities Enforcement Forum in Washington.
The initiative, Wadhwa said, is designed to ensure "that regulated entities, including broker-dealers, investment advisors and credit ratings agencies, comply with the recordkeeping requirements of the federal securities laws."
SEC Chairman Gary Gensler defended the crackdown in late October, stating that the agency has found that "hundreds of people at dozens of firms were blowing right past the [off-channel communication] rules that even their firms had in place."
'A Cash Cow'
Republican SEC Commissioner Hester Peirce told lawmakers in late September that the initiative has become a "cash cow" for the agency.
Wadhwa said that, in fiscal year 2024, the commission brought recordkeeping cases resulting in over $600 million in civil penalties against more than 70 firms, including the commission's first cases charging recordkeeping violations against municipal advisors.
Since December 2021, "that initiative has resulted in charges against more than 100 firms and over $2 billion in penalties. The firms all admitted that their conduct violated the recordkeeping requirements," he said.
Wadhwa then laid out the factors that the SEC considers when assessing what penalty to recommend in a particular action.
"We consider the size of the firm and the regulated parts of its business to ensure that the penalty is adequate to serve as a deterrent against future violations," he said.
