RIA to Pay $6.5M for Communications, Ethics Charges

RIA to Pay $6.5M for Communications, Ethics Charges


A registered investment adviser recently agreed to a $6.5 million penalty to settle Securities and Exchange Commission (SEC) charges concerning both its communications and ethics over a two-year period.

On April 3, 2024, the SEC said it had charged Senvest Management LLC for both “widespread and longstanding” failures to maintain and preserve certain electronic communications, as well as for failing to enforce its own code of ethics.

The SEC order says that between at least January 2019 and December 2021, multiple Senvest employees, of varying levels of authority, used personal texting platforms and other non-Senvest electronic communication services (“off-channel communications”) to communicate about Senvest-related business.

This violated a pair of Senvest’s own policies and procedures, which require the company to “retain all electronic communications that it sends and receives” and prohibits employees “from using non-Senvest electronic communication services for any business purpose.” Moreover, the SEC says the firm was unable to keep “the substantial majority” of these communications, some of which the Advisers Act required them to retain.

The order notes that even Senvest supervisors responsible for preventing such conduct used off-channel communications to discuss Senvest business. The SEC pointed out a specific instance in which three senior employees did this on personal devices designed to automatically delete messages after 30 days. According to the order, “These auto-deletions prevented Senvest, and the Commission’s staff, from quantifying the actual number and subject matter of all off-channel communications at Senvest.”

Senvest’s recordkeeping failures potentially could have impacted Senvest’s responses to record requests and documents subpoenas from the SEC during this time, the Commission says.

In addition to communications failures, the SEC also says Senvest employees failed to adhere to the company’s own code of ethics, which requires employees to obtain pre-clearance for all securities transactions in their personal accounts.

In settling the matter, Senvest:

  • Admitted the facts set forth in the Commission’s order
  • Was censured
  • Agreed to pay a $6.5 million penalty to the SEC
  • Agreed to cease and desist from committing or causing any violations and future violations of Sections 204, 204A, and 206(4) of the Advisers Act, and Rules 204-2, 204A-1, and 206(4)-7

Senvest also agreed to retain a compliance consultant, who could conduct comprehensive reviews of its policies and procedures related to the SEC’s charges.

At ACC, we strive to keep our clients in compliance with all recording keeping and communication requirements. We offer proactive compliance solutions, including outsourced CCO support, for the investment management community. Contact us to schedule a consultation.