The Securities and Exchange Commission has charged a New Jersey-based broker-dealer and two affiliated investment advisers with violating whistleblower protection rules, reports Advisor Hub.
The charges were announced last week against Nationwide Planning Associates, Inc. of Fair Lawn, investment adviser NPA Asset Management, LLC, and state-registered investment adviser Blue Point Strategic Wealth Management, LLC. They were accused of impeding brokerage customers and advisory clients from reporting securities law violations to the SEC, and agreed to pay a settlement with combined civil penalties of $240,000.
The SEC found that from May 2021 through February 2024, Nationwide, NPA, and Blue Point asked 11 retail clients to sign confidentiality agreements in connection with payments made by the firms to the clients’ investment accounts. The payments were intended to compensate the clients for losses caused by the firms’ alleged breaches of federal or state securities laws, the commission said.
“The order finds that the agreements contained provisions that impeded clients from reporting potential securities law violations to the SEC by permitting communications only where the SEC first initiated an inquiry”, the SEC said. It was reported that some of the agreements further required the clients to represent that they had not reported the underlying dispute to the SEC or to another securities regulator and would forever refrain from such reporting.
“Pure and simple, investors need to be able to report complaints or evidence of wrongdoing to the SEC without impediment,” said Corey Schuster, Co-Chief of the Enforcement Division’s Asset Management Unit. “We will continue to hold firms accountable for putting roadblocks between us and their investors.”
Nationwide, NPA, and Blue Point were each found to be in violation of Rule 21F-17(a) under the Securities Exchange Act of 1934, a whistleblower protection rule that prohibits taking any action to impede an individual from communicating directly with SEC staff about possible securities law violations. The defendants did not admit or deny the findings, but each agreed to be censured and to cease and desist from violating the rule. They further agreed to a combined penalty, with NPA paying $160,000, Nationwide $70,000, and Blue Point $10,000.
The SEC said that once the three firms were informed of their violations, they stopped using the agreements’ problematic provisions and sent communications to all clients who signed those agreements releasing them. The SEC said it recognized those efforts when calculating its fines.
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