Senvest Management, a privately owned hedge fund sponsor which invests in US public equity markets, has been hit with a US$6.5 million penalty for its use of off-channel communications.
The US Securities and Exchange Commission (SEC) alleged the firm violated federal securities laws over “widespread and long standing” failures to preserve electronic communications.
Eric Werner, director of the SEC Fort Worth regional office, said: “The Commission continues to focus on regulated entities’ compliance with the recordkeeping requirements. Adherence to these requirements is essential for the Commission to effectively exercise its regulatory oversight and enforce the federal securities laws.”
According to the SEC, from at least January 2019 through December 2021, Senvest employees discussed company business internally and externally over text, in violation of the Investment Advisers Act of 1940. The SEC also charged Senvest with failing to enforce its code of ethics.
Senvest failed to maintain the off-channel communications as required under federal securities laws and the firm’s own policies. In one instance, three senior employees communicated on personal devices that were set to automatically delete messages after 30 days, the regulator alleged.
As well as the penalty, the firm also agreed to retain a compliance consultant to conduct reviews of its electronic communications policies and procedures.
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