Piper Sandler, a prominent investment banking firm, has agreed to pay $16 million in civil penalties to settle investigations by U.S. regulators concerning its record-keeping practices. This settlement, announced on Tuesday, is part of a broader regulatory crackdown on Wall Street’s communication compliance.
Details of the Settlement
The Minneapolis-based firm will pay $14 million to the Securities and Exchange Commission (SEC) and $2 million to the Commodity Futures Trading Commission (CFTC). These fines are the result of probes into unapproved business communications conducted via messaging platforms.
“The Company has reached agreements in principle with the staff of the SEC and with the staff of the CFTC to resolve investigations regarding compliance with recordkeeping requirements for business-related communications sent over unapproved electronic messaging channels,” Piper Sandler stated in a recent filing.
Financial Performance Amid Settlement
The announcement coincided with Piper Sandler’s Q2 2024 revenue report, which revealed a revenue increase to $340 million, up from $290 million the previous year. Net profit for the quarter was $14.9 million, with earnings per share (EPS) reaching $2.19, compared to $0.26 in Q2 2023.
Broader Regulatory Context
The settlement with Piper Sandler is part of a larger initiative by the SEC to ensure financial institutions properly document and preserve employee communications, especially with the increased reliance on remote work during the COVID-19 pandemic. Regulators mandate that banks and investment firms maintain comprehensive records of staff communications and generally prohibit the use of personal email, texts, and messaging applications for work-related matters.
Since 2021, the SEC has imposed over $1.7 billion in fines on various firms for similar compliance failures. Major banks, including JPMorgan Chase and Wells Fargo, have also faced significant penalties as part of this regulatory sweep. In March this year, JPMorgan was fined nearly $350 million for alleged misconduct spanning from 2014 to 2023.
Challenges for Financial Institutions
The Piper Sandler case underscores the challenges broker-dealers and investment advisers face in adhering to record-keeping requirements amidst the growing use of off-channel communications. Earlier this year, Oppenheimer settled similar charges with the SEC, agreeing to pay $12 million in civil penalties. Alongside Oppenheimer, 15 other broker-dealers and investment advisers also received penalties at that time.
