On April 3, 2024, the Securities and Exchange Commission announced that charges were filed against Senvest Management LLC, a registered investment adviser, for allegedly failing to maintain and preserve certain electronic communications made by employees at the company in violation of federal securities laws. According to the SEC, investment advisors are required by Section 204 of the Investment Advisers Act of 1940 (“the Advisers Act”) to make and keep records for specified periods of time and furnish copies of these records to the SEC representatives. Advisers Act Rule 204-2(a)(7), in particular, requires investment advisors to preserve originals and copies of written communications that, among other things, relate to recommendations made or advice given concerning the purchase or sale of securities. In order to resolve the charges, Senvest settled with the SEC and agreed to pay a $6.5 million penalty, admitted to facts set forth in the SEC’s Order, and acknowledged that it violated federal securities laws.
According to the SEC’s Order, between January 2019 and December 2021, Senvest employees who worked in various levels of authority, used unapproved electronic communication methods, including personal texting platforms and other non-Senvest messaging applications, to communicate about company business in violation of the company’s policies and procedures. The SEC accused Senvest of failing to monitor whether employees were complying with the firm’s work-related communications policies. During this timeframe, the SEC further alleged that “no Senvest employee took steps to copy their business messages for retention by Senvest.” According to the SEC, at least three senior Senvest officers programmed their personal devices to automatically delete messages after 30 days in violation of federal recordkeeping requirements. Senvest’s lack of monitoring during this stated timeframe also allegedly prevented the company from detecting code of ethics violations that required pre-clearance for securities transactions in employees’ personal accounts. The SEC concluded that the identified conduct violated the recordkeeping and ethics provisions in the Advisers Act.
In addition to the payment of a civil monetary penalty and Senvest’s acknowledgement and admissions, the company was censured by the SEC and ordered to cease-and-desist from engaging in future violations. Senvest also agreed to improve its compliance policies and procedures and retain a compliance consultant to conduct periodic reviews of the company’s compliance program to ensure that it complies with federal securities laws.