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Broker-Dealer Fined for Failing to Produce Emails

The SEC fined and censured a broker-dealer for failing to produce requested emails as part of an enforcement investigation related to potential money laundering activities.  Despite repeated requests, the respondent could not produce emails for a 4-month period relevant to the subject activity.  The firm initially represented that it produced all required emails, but ultimately found 40,000 missing emails from 30 employees maintained on a back-up email archive.  The SEC noticed that the document production omitted emails from the correspondent firm through which the potential money laundering activity occurred.  Rule 17a-4(j) of the Exchange Act requires broker-dealers to promptly furnish to the SEC any required records.  The SEC also charged the firm with failing to file Suspicious Activity Reports.

OUR TAKE: Don’t tell the SEC that you have complied with their document requests unless you have conducted adequate internal due diligence.   The Enforcement staff will not look kindly on reckless or intentional misrepresentations during investigations.  Also, lying to the staff can result in criminal penalties.