SEC Imposes $6.5 Million Penalty on Senvest Management for Regulatory Breaches

The Securities and Exchange Commission (SEC) has announced charges against Senvest Management LLC, a registered investment adviser, for significant and long-standing failures in maintaining and preserving electronic communications, along with a failure to enforce its code of ethics. As a consequence of these violations, Senvest has agreed to a settlement that includes a $6.5 million penalty and commitments to enhance its compliance policies and procedures.

According to the SEC's findings, spanning from January 2019 through December 2021, Senvest employees across various levels of authority frequently engaged in business-related communications internally and externally using personal texting platforms and other non-Senvest messaging applications. This practice directly contravened the firm's established policies and procedures. Moreover, Senvest failed to uphold its obligation to maintain or preserve these off-channel communications as mandated by federal securities laws and internal policies. In a particularly egregious instance, three senior employees conducted off-channel communications on personal devices programmed to automatically delete messages after 30 days.

Furthermore, the investigation revealed instances where Senvest employees failed to adhere to the provisions of the firm’s code of ethics, specifically regarding obtaining pre-clearance for personal securities transactions.

Eric Werner, the Director of the Fort Worth Regional Office, emphasized the critical importance of regulatory compliance in his statement, asserting, “Adherence to these requirements is essential for the Commission to effectively exercise its regulatory oversight and enforce the federal securities laws.”

The SEC’s order found Senvest in violation of specific recordkeeping and ethics provisions outlined in the Investment Advisers Act of 1940, as well as a failure to reasonably supervise to prevent and detect violations. In addition to the monetary penalty, Senvest has been censured and directed to cease and desist from future violations of relevant securities laws.

As part of the settlement, Senvest has committed to engaging a compliance consultant to conduct thorough reviews of its policies and procedures relating to the retention of electronic communications found on personal devices. The firm will also address frameworks for handling non-compliance by its employees with these policies and procedures.

This enforcement action underscores the SEC’s ongoing commitment to upholding regulatory standards within the financial industry and ensuring accountability among registered investment advisers.

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