Apex Clearing Corp, a Texas-based broker-dealer, has just argued in the Fifth Circuit Court of Appeals that the firm received harsher settlement terms than other targets of a wave of SEC enforcement actions related to business communications.
When led by Gary Gensler, the SEC targeted companies suspected of failing to preserve business-related comms using messaging apps such as WhatsApp on personal devices.
As Bloomberg Law reports, the SEC had denied the company’s request to alter its settlement terms, despite the company pointing out that the agency had changed course on by January 2025 in these cases by “imposing much less burdensome undertakings on other firms being charged for similar conduct” and rule violations.
Apex claims the SEC’s denial of relief was “arbitrary and capricious,” pointing to the similarities between itself and the other companies “that avoided requirements such as hiring an independent consultant and abiding by their directives.”
SEC’s rebuttal
The SEC responded to the accusation by saying that any company takes this risk; cases decided under different regimes and in different times can involve different settlement outcomes.
“Every settlement carries that risk, and if that were enough to require reopening a settlement, no settlement would ever be final, and the Commission would not be able to settle cases based on its best judgment because it would have to consider how past settlements would be affected,” said Daniel Matro, an SEC attorney.
As a court document filed in December points out, attorneys from the law firm Sidley Austin note that the SEC had represented to Apex during settlement proceedings with the company that its “Off-Channel Communications Initiative (Initiative)” would involve “standardized settlement terms.”
As a lawyer from Sidley Austin, which filed the Fifth Circuit on behalf of Apex in December, states in a LinkedIn post referencing the petition for review: “The Commission repeatedly explained through multiple Commission orders that Initiative settlements contained ‘Standardized settlement terms.’ And then the SEC produced documentation to prove it.
“But Apex argues that it can clearly show that only months after Apex agreed to the Initiative’s supposedly standardized terms, the Commission entered into Initiative settlements with firms similarly situated to Apex for materially indistinguishable violations of the same provisions of the federal securities laws but imposed undertakings that were more substantially less burdensome than the standardized terms than had until them been applied uniformly as part of the Initiative.”
Apex contends that the “SEC has modified settled order when subsequent developments render continued enforcement inequitable – particularly in enforcement sweeps where later settlements reveal that an early settler is being held to inequitably harsher undertakings.”
Recordkeeping sweeps in 2024 and 2025
Apex was one of 26 firms that settled with the SEC in a “sweep” enforcement action in August 2024 to pay a total of $390m in full for recordkeeping failures related to off-channel communications.
In that settlement order, the largest financial penalty went to Ameriprise Financial Services, LLC, which paid $50m to settle the charges. Apex was ordered to pay $6m in that order.
At the time, the SEC said “every firm must retain a compliance consultant to conduct a comprehensive review of their supervisory, compliance, and other policies and procedures designed to ensure relevant electronic communications are preserved in accordance with federal securities laws.”
Apex argues now that “other firms – including units of Apollo Global Management Inc, Blackstone Inc and Charles Schwab Corp – got a lighter touch in their January 2025 settlements with the Wall Street regulator.”
What Apex is referring to here is a separate sweep action conducted in that first month of 2025 against 12 firms (nine investment advisers and three broker-dealers) for a combined $63.1m.
The stiffest penalty in that settlement action went to Blackstone Alternative Credit Advisors LP (with Blackstone Management Partners LLC and Blackstone Real Estate Advisors LP) for $12m in total. The smallest penalty went to PJT Partners LP, which got a much lower $600,000 for self-reporting the misconduct to the regulator.
Easing back, mostly
For roughly three years starting in 2021, the SEC ran a broad sweep, targeting firms that failed to capture and retain texts, emails, and other electronic messages with clients.
Interestingly, since then FINRA has picked up the reins, bringing its own recordkeeping and communications cases, including a case against Ally Invest featuring an $850,000 fine last year.
And last month it brought one against Benjamin F Edwards & Co in which the agency said the firm had failed to supervise, retain and produce business-related text messages, outlining how some of the missing messages were needed in a FINRA arbitration matter.
In contrast, the SEC has pulled back and even talked in the context of a renewed and more streamlined enforcement approach for the agency.
In an October 2025 keynote speech, SEC Chair Paul Atkins said his agency “must go after cases of genuine harm and bad acts, but we must view cases of benign or innocent actions differently. In the past, we have seen examples of enforcement actions in areas, such as retention of books and records, that consumed excessive Commission resources not commensurate with any measure of investor harm.”
He reiterated this in an exclusive interview with the Financial Times, criticizing what he called the agency’s missteps under the Biden administration and setting out a vision for a more predictable regulatory regime.
A central theme of the discussion was Atkins’s opposition to the agency’s previously aggressive, often unpredictable enforcement tactics, vowing to ease the SEC’s focus on off-channel communications cases.
Just as the SEC was articulating a pullback in its off-channel communications focus, the agency inserted a clarification in its recent update to its enforcement manual. New language specifies that off-channel communications methods, such as iMessage and Signal, are included in its definition of “document” for subpoenas and requests. And it noted that these communication channels are potential subjects of document preservation letters.
And FINRA announced last month that it plans to seek SEC approval for an updated rule that would allow broker-dealers to make electronic delivery the default method for investor disclosures, notices and other communications.
These developments reflect an effort to do two things at one time – better align regulatory requirements with how people communicate in 2026, and ease compliance burdens tied to the growing number of messaging channels that have been the focus of national enforcement actions.