The SEC Fines Ten Firms $79M for New Violations

September 29, 2023

The SEC has fined ten firms $79M for new violations related to communication policies according to the latest report.

On Friday the SEC charged broker-dealers and investment advisers — including Perella Weinberg Partners and Interactive Brokers — for “widespread and longstanding failures to maintain and preserve electronic communications”, reports Financial Times.

The companies charged on Friday admitted the SEC’s findings and acknowledged that they violated US securities laws, the regulator said.

Perella Weinberg and two of its affiliates, which reported their own violations, agreed to the lowest penalty of $2.5mn.

“One of the orders included in today’s announced actions is not like the others,” said Gurbir Grewal, director of the SEC’s enforcement division.

“There are real benefits to self-reporting, remediating and co-operating.”

Interactive Brokers Corp and an affiliate agreed to the highest penalty, at $35mn, and also faced a $20mn fine from the Commodity Futures Trading Commission for similar violations, reports FT.

According to the SEC, its probe of Interactive Brokers “uncovered pervasive off-channel communications at all seniority levels”.

Robert W Baird & Co agreed to pay $15mn, and William Blair & Company and an affiliate paid $10mn.

The other businesses included Nuveen Securities and Fifth Third Securities.

The SEC recently fined Goldman Sachs $6 million for failing to provide complete and accurate securities trading information, known as blue sheet data.

According to the SEC’s order, over a period of approximately ten years, Goldman made more than 22,000 deficient blue sheet submissions to the SEC.

The order finds that, as a result of 43 different types of errors, these submissions contained missing or inaccurate trade data for at least 163 million transactions.

Citadel was also recently fined $7 million for illegal short selling violations.

While retail investors applauded the investigation, many said $7 million was merely a slap on the wrist for the financial crimes.

For Five Years Citadel Marked Short Sales As Long

For five years Citadel incorrectly marked short sales as long sales and vice versa according to the SEC’s latest report.

Retail investors have created an uproar on social media for two primary reasons.

Citadel was only fined $7 million — which investors allege is merely a ‘pay to play’ fine.
Citadel’s naked short selling “conspiracies” ended not being conspiracies, despite Bloomberg and WSJ journalists idolizing Citadel’s Ken Griffin.

For years now, retail investors have raised concerns over Citadel’s hedge fund and market making power, claiming there is simply too much conflicts of interest.

The Securities and Exchange Commission says the market maker violated a provision of Regulation SHO, the regulatory framework designed to address abusive short selling practices, which requires broker-dealers to mark sale orders as long, short, or short exempt.

According to the SEC’s order, for a five-year period, it is estimated that Citadel Securities incorrectly marked millions of orders, inaccurately denoting that certain short sales were long sales and vice versa.

“Compliance with the order marking requirements of Reg SHO is a key component of regulatory efforts to curtail abusive market practices, including ‘naked’ short selling,” said Mark Cave, Associate Director of the SEC’s Division of Enforcement.

“This action against Citadel Securities demonstrates that a broker-dealer’s failure to comply with the requirements of Reg SHO can have negative downstream consequences on the accuracy of the firm’s electronic records, including its electronic blue sheet reporting, depriving the Commission of important information about the markets it regulates.”

Investors on social media say Citadel’s punishment is miniscule compared to the institutions massive gains it claims to have made, especially in the past years.

Keep in mind, Madoff never lost either.

Also Read: “The Game is Rigged”, Says Ex-Citadel Data Scientist

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