Toronto-Dominion Bank TD-T and Royal Bank of Canada RY-T are paying multimillion-dollar penalties to settle charges with the U.S. Securities and Exchange Commission over their employees’ unapproved communication methods.
TD Bank will pay a US$46.5-million penalty, including a fine against investment bank Cowen and Co., which TD recently acquired. RBC will pay a US$45-million penalty.
TD Bank is also paying a US$78-million civil penalty to settle charges with the Commodity Futures Trading Commission over the same issue.
In total, the SEC announced US$393-million worth of settlements on Wednesday, affecting 26 companies. The CFTC has imposed US$1.2-billion in civil monetary penalties on 24 financial institutions since 2021.
“Each of the SEC’s investigations uncovered pervasive and long-standing use of unapproved communication methods, known as off-channel communications, at these firms,” the regulator said in a statement. Conversations by personal text message and chat apps, such as WhatsApp, fall into this category.
“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 failure to maintain and preserve required records deprives the SEC of these communications in its investigations.”
Brokers, swaps dealers and investment advisers that are registered with the two U.S. agencies have record-keeping requirements. Regulators have grown increasingly concerned about dealers’ use of personal devices, noting that failure to maintain proper records can thwart oversight and investigations into potential wrongdoing.
“We hold ourselves to the highest levels of integrity, ethics and compliance and work diligently to protect and safeguard the interests of our clients, customers, and our colleagues. The settlement resolves this matter for TD. We co-operated fully with regulators in their review of this industrywide matter, and we are investing in technology and enhancing our electronic communications policies and procedures,” TD said in an e-mailed statement.
With a report from David Milstead