The Securities and Exchange Commission has taken the latest step in its crackdown on off-channel communications in the financial industry, AdvisorHub reports.
The SEC announced charges against 26 broker-dealers, investment advisers, and dually-registered broker-dealers and investment advisers. They were accused of widespread and longstanding failures by the firms and their personnel to maintain and preserve electronic communications. The firms will have to pay a combined $392.75 million in civil penalties for their violations of these recordkeeping requirements.
Three of the firms, as noted below, self-reported their violations and, as a result, will pay significantly lower penalties.
- Ameriprise Financial Services, LLC agreed to pay a $50 million penalty
- Edward D. Jones & Co., L.P. agreed to pay a $50 million penalty
- LPL Financial LLC agreed to pay a $50 million penalty
- Raymond James & Associates, Inc. agreed to pay a $50 million penalty
- RBC Capital Markets, LLC agreed to pay a $45 million penalty
- BNY Mellon Securities Corporation, together with Pershing LLC, agreed to pay a $40 million penalty
- 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
- First Trust Portfolios L.P. agreed to pay an $8 million penalty
- Apex Clearing Corporation agreed to pay a $6 million penalty
- Truist Securities, Inc., together with Truist Investment Services, Inc. and Truist Advisory Services, Inc., which self-reported, agreed to pay a $5.5 million penalty
- Cetera Advisor Networks LLC, together with Cetera Investment Services LLC, which self-reported, agreed to pay a $4.5 million penalty
- Great Point Capital, LLC agreed to pay a $2 million penalty
- Hilltop Securities Inc., which self-reported, agreed to pay a $1.6 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
The firms admitted the facts set forth in their respective SEC orders, acknowledged that their conduct violated recordkeeping provisions of the federal securities laws, agreed to pay the penalties and have started implementing improvements to their compliance policies to address these violations.
“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 SEC said it found pervasive and longstanding use of unapproved communication methods at these firms, whose personnel sent and received off-channel communications that were records required to be maintained under securities laws. 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.
A spokesperson for Edward Jones said, “Edward Jones was one of many firms reviewed by the SEC regarding the retention of electronic communications. We cooperated fully with the SEC and are pleased to have resolved this matter. We take this very seriously and have made and will continue to make enhancements to our policies, procedures and practices.”
An RBC spokesperson said the company was “pleased to have resolved this matter” and remains “focused on upholding all regulatory requirements and continuing to enhance our compliance protocols.”
The SEC has filed administrative complaints against dozens of firms alleging failures in compliance with record-keeping requirements involving off-channel communications.
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