On Nov. 22, 2024, the Securities and Exchange Commission (SEC) announced that it filed 583 enforcement actions for the 2024 fiscal year, resulting in $8.2 billion in financial remedies, the highest amount in SEC history.
Today, we’ll be breaking down exactly what made up this record total and how your firm can effectively avoid common areas of compliance that became headline news this past year.
The Cases: 583 Violations in a Matter of 12 Months
The SEC and other regulatory bodies enforce steep fines and penalties to send a clear message and (hopefully) deter future violations.
In FY2024, a considerable number of financial remedies came from violations regarding off-channel communications (more than $600 million), the marketing rule (nearly $1.5 million), and crypto activities (more than $4.5 billion).
Note: The SEC’s fiscal years run from October 1 to September 30 of each year.
Off-Channel Communications
The SEC alleges that more than 70 firms failed to maintain recordkeeping practices for off-channel communications. In a specific instance, the SEC charged 16 for recordkeeping violations, alleging that personal texts on business matters were not preserved. The 16 charges resulted in more than $81 million combined in civil penalties.
Over the whole fiscal year, however, off-channel charges resulted in more than $600 million in civil penalties and included the SEC’s first cases charging recordkeeping violations against municipal advisers.
What can your firm do to avoid these violations?
- Ensure that your firm captures and preserves all relevant communications, including e-mails, electronic chats, text messages, voicemails, social media communications, etc.
- Conduct regular internal audits, testing and reviewing recordkeeping processes and addressing any red flags.
- Collaborate with all necessary teams, including IT, to ensure data integrity and accessibility for regulatory compliance examinations.
Learn more: What Went Wrong: 16 Firms to Pay $81 Million Combined for Recordkeeping Violations
Cryptocurrency
The SEC alleges that more than 5 entities violated its anti-money laundering (AML) regulations, putting cryptocurrencies investors at risk. Across the 2024 violations, common deficiencies were:
- Soliciting investors to trade on fake cryptocurrency platforms
- Failure to register crypto assets
- False and misleading disclosures about the strength of AML program and monitoring of crypto customers
What can your firm do to avoid these violations?
- Conduct thorough due diligence for high-risk customers and clearly share the risks that might be involved with certain investments.
- Enlist the help of a compliance consultant to help your firm navigate evolving cryptocurrency guidance.
- Regularly audit and review your firm’s internal controls to identify and address any weaknesses in the employee compliance program.
Marketing Rule
The SEC also charged firms for violating its Marketing Rule for Investment Advisers. The SEC charged 5 firms for allegedly misrepresenting their performance to the general public on their websites. What’s more, the SEC alleges that firms didn’t adopt and implement policies and procedures that would ensure that all marketing materials were accurate. More than $200,000 was paid in penalties.
What can your firm do to avoid these violations?
- Include clear and prominent disclosures in all marketing materials for clients and prospective clients to view.
- Implement processes of ensuring that all performance data on marketing materials is accurate and complete.
- Regularly audit, review, and update marketing materials as needed.
Learn more: Managing the New Marketing Rule: How to Comply with Performance Advertising
Compliance Management with COMPLY for 2025 and Beyond
Nearly 90 days into fiscal year 2025, the SEC has already filed nearly 20 charges.
Common violations are:
- Failure to register as a dealer of crypto assets
- Failure to implement policies and procedures to protect investors’ funds
- Failure to complete regulatory filing on time
- Failure to establish, implement, and enforce policies and procedures regarding the misuse of material non-public information
- Misleading investors about the stability of crypto assets
The SEC’s rigorous examinations, onslaught of major regulations affecting the industry in 2025, enforcement actions offer an opportunity to learn and find creative solutions. With COMPLY, you have the detailed and innovative compliance partner you need to build an effective and sustainable compliance program.
COMPLY Consulting Services are designed to help you:
- Navigate complex and sometimes porous regulations with reasonable solutions.
- Bridge the gap between your compliance team and your firm and create a culture of compliance.
- Meet regulatory compliance requirements while minimizing burdens on business practices.
Ready to build a compliance program that’s compliant in 2025 and beyond? Schedule time to speak with an expert today!