The Securities and Exchange Commission (SEC) today announced charges against 26 broker-dealers, investment advisers, and dually registered broker-dealers and investment advisors for “widespread and longstanding failures by the firms and their personnel to maintain and preserve electronic communications.”
“As today’s enforcement actions against more than two dozen firms reflect, we remain committed to ensuring compliance with the books and records requirements of the federal securities laws…”
SEC’s Gurbir S. Grewal
The firms admitted the facts set forth in their respective SEC orders, acknowledged that their conduct violated recordkeeping provisions of the federal securities laws, and agreed to pay combined civil penalties of $392.75 million.
In a press release today, the SEC said the firms have begun implementing improvements to their compliance policies and procedures to address these violations.
Four firms received the largest fines at $50 million each. That includes Ameriprise Financial Services, LLC; Edward D. Jones & Co., L.P.; LPL Financial LLC; and Raymond James & Associates, Inc.
RBC Capital Markets, LLC agreed to pay a $45 million penalty and BNY Mellon Securities Corporation, together with Pershing LLC, agreed to pay a $40 million penalty.
Other eight-figure settlements include:
- TD Securities (USA) LLC, together with TD Private Client Wealth LLC and Epoch Investment Partners, Inc., agreed to pay a $30 million penalty.
- Osaic Services, Inc., together with Osaic Wealth, Inc., agreed to pay an $18 million penalty.
- Cowen and Company, LLC, together with Cowen Investment Management LLC, agreed to pay a $16.5 million penalty.
- Piper Sandler & Co. agreed to pay a $14 million penalty.
“As today’s enforcement actions against more than two dozen firms reflect, we remain committed to ensuring compliance with the books and records requirements of the federal securities laws, which are essential to investor protection and well-functioning markets,” said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement. “Among this group of firms, there are several that differentiated themselves by self-reporting prior to the staff’s investigation, demonstrating once again the real benefits of proactive cooperation.”
The three firms that received credit for self-reporting and will pay reduced civil penalties include:
• Truist Securities, Inc., together with Truist Investment Services, Inc. and Truist Advisory Services, Inc., which agreed to pay a $5.5 million penalty.
• Cetera Advisor Networks LLC, together with Cetera Investment Services LLC, which agreed to pay a $4.5 million penalty.
• Hilltop Securities Inc., which agreed to pay a $1.6 million penalty.
Each of the SEC’s investigations uncovered pervasive and longstanding use of unapproved communication methods, known as off-channel communications (including texting and unauthorized messaging apps), at these 26 firms. As described in the SEC’s orders, the firms admitted that, during the relevant periods, their personnel sent and received off-channel communications that were records required to be maintained under the securities laws.
The SEC’s press release said the failure to maintain and preserve required records deprives the SEC of these communications in its investigations. The failures involved personnel at multiple levels of authority, including supervisors and senior managers.
The firms were each charged with violating certain recordkeeping provisions of the Securities Exchange Act, the Investment Advisers Act, or both. The firms were also each charged with failing to reasonably supervise their personnel with a view to preventing and detecting those violations.
In addition to the previously noted fines, other firms fined include:
- First Trust Portfolios L.P. agreed to pay an $8 million penalty
- Apex Clearing Corporation agreed to pay a $6 million penalty
- Great Point Capital, LLC agreed to pay a $2 million penalty
- P. Schoenfeld Asset Management LP agreed to pay a $1.25 million penalty
- Haitong International Securities (USA) Inc. agreed to pay a $400,000 penalty
In addition to the significant financial penalties, each of the firms was ordered to cease and desist from future violations of the relevant recordkeeping provisions and was censured.
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Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
