Milwaukee-based financial services firm
Baird has agreed to pay a $15 million penalty to resolve charges from the Securities and Exchange Commission that employees improperly communicated through personal text messages and the firm did not properly preserve records of the communications.
“While we are obviously disappointed with the findings, we have made enhancements to our compliance procedures in recent years related to this issue and we are pleased to have resolved the matter,” Baird spokesperson Angela White said in an email.
Baird was one of a number of firms to have penalties announced
late last week. Others included Interactive Brokers, which is paying a $35 million penalty; William Blair, which agreed to pay $10 million; Nuveen Securities, paying $8.5 million; Fifth Third Securities, paying $8 million; and Perella Weinber, paying $2.5 million.
The firms are not the first to be hit with penalties for recordkeeping and off-channel communication. SEC rules require broker-dealers and investment advisors to maintain originals of various communications for set periods of time. The rules are meant to help with compliance monitoring for securities laws, antifraud provisions and financial responsibility standards.
In December 2021, JPMorgan Chase agreed to pay a $125 million penalty for employees using personal devices for business communications. In September 2022, eight other firms agreed to $125 million penalties including Barclays Capital, Deutsche Bank, Goldman Sachs and Morgan Stanley. Wells Fargo also agreed to a $125 million penalty and BMO Capital Markets agreed to a $25 million penalty in August
Combined, the penalties total more than $1.6 billion across nearly 30 firms and their affiliates.
In the case of Baird, the SEC found “the widespread and longstanding failure of Baird employees throughout the firm, including at senior levels,” to follow recordkeeping requirements.
Employees sent and received text messages on their personal phones and Baird did not maintain “the substantial majority of these written communications,” the documents ordering Baird’s penalty say.
“Baird’s supervisors, who were responsible for supervising junior employees, routinely communicated off-channel using their personal devices,” the order says. “In fact, managing directors responsible for supervising junior employees themselves failed to comply with Baird’s policies by communicating using non-Baird approved methods on their personal devices about Baird’s broker-dealer and investment adviser businesses.”
Baird had responded to a number of subpoenas and required requests over the course of the SEC’s investigation and made the commission a settlement offer, which was accepted.
The order notes that Baird had promptly taken steps to address communication and record keeping issues even before being approached by SEC staff. Those steps included “an on-channel texting application tool for Baird employees.”
The firm also agreed to hire an independent consultant to review its policies, training and surveillance on communication and record keeping and will have to notify the SEC any time it disciplines an employee for violating policies on the preservation of electronic communications.
