Three Northwestern Mutual subsidiaries will pay the highest penalty among firms that were charged with recordkeeping violations by the Securities and Exchange Commission, according to AdvisorHub.
The case involves 16 firms who paid a total of over $81 million in civil penalties for widespread recordkeeping failures, specifically deficiencies in maintaining and preserving electronic communications.
Northwestern Mutual Investment Services LLC, Northwestern Mutual Investment Management Co. LLC and Mason Street Advisors LLC paid $16.5 million for recordkeeping violations that were committed within each entity.
The second highest penalty, $15 million, was paid by Guggenheim Securities LLC, together with Guggenheim Partners Investment Management LLC. Oppenheimer & Co paid $12 million.
During the course of its investigation of the 16 firms, the SEC found what it called pervasive and longstanding uses of unapproved communication methods, known as off-channel communications.
The firms, which included five broker-dealers, seven dually registered broker-dealers and investment advisers, and four affiliated investment advisers, admitted that their employees communicated through personal text messages about the business of their employers. The firms also admitted, according to the charges, that “their employees sent and received off-channel communications related to recommendations made or proposed to be made and advice given or proposed to be given. The firms did not maintain or preserve the substantial majority of these off-channel communications, in violation of the federal securities laws.” The SEC said this failure to preserve the required records likely deprived the commission of the communications needed for its investigations.
As part of the settlement, the firms not only paid the civil penalties but also admitted the facts set forth by the SEC, acknowledged that their conduct violated recordkeeping provisions of the federal securities laws, and have begun implementing improvements to their compliance policies and procedures to address the violations. They were also censured and ordered to cease future violations of the relevant provisions.
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