A broker-dealer agreed to pay $1.25 million to settle SEC charges that it violated Exchange Act books and records provisions.
According to the SEC Order, BGC Financial, L.P. ("BGC") failed to (i) retain audio files requested by SEC staff and (ii) maintain adequate records of transactions related to compensation, reimbursement, travel, entertainment and other expenses.
The SEC determined that BGC deleted the audio files despite receiving two SEC requests to preserve them. The deletion of the audio files reportedly occurred because the technicians responsible for the recordings were unaware of the litigation hold notice that pertained to the requests.
The SEC further alleged that BGC either failed to record or inaccurately recorded:
- employees' compensation, including (i) payments for travel and (ii) a sports season ticket package;
- gifts to its customers; and
- funds used for personal expenses.
BGC agreed to the settlement without admitting or denying the SEC allegations.
Commentary / Kyle DeYoung
$1.25 million is a hefty penalty for a books and records violation. This case underscores the importance of promptly issuing and complying with litigation hold notices as soon as a company becomes aware of a government investigation. Companies should take particular care to confirm that litigation holds are distributed to, and understood by, everyone who may have, or control, responsive information, including IT departments and other technical groups that may have responsibility for phone records or data storage.
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