Sixteen firms, ranging from broker dealers to investment advisors, pay more than $81 million in penalties to settle charges from the Securities and Exchange Commission (SEC) over widespread and longstanding recordkeeping failures.
The five broker-dealers, seven dually registered broker-dealers and investment advisers and four affiliated investment advisers admitted their conduct had violated recordkeeping provisions of the federal securities laws, and have begun implementing compliance policies and procedures improvements, the SEC said. The SEC said the firms and their employees failed to maintain and preserve electronic communications.
“Today’s actions against these 16 firms result from our continuing efforts to ensure that all regulated entities comply with the recordkeeping requirements, which are essential to our ability to monitor and enforce compliance with the federal securities laws,” said Gurbir S. Grewal, director of the SEC’s Division of Enforcement.
According to an investigation by the SEC, the firms’ employees used personal text messages to communicate about the business of their employers, and employed off-channel communications to make recommendations or share advise with clients. The firms did not maintain or preserve the majority of the off-channel communications, the SEC said, in violation of federal securities laws.
The firms involved included Northwestern Mutual Investment Services LLC, together with Northwestern Mutual Investment Management Co. LLC and Mason Street Advisors LLC (collectively, Northwestern Mutual), which agreed to pay a $16.5 million penalty; Guggenheim Securities LLC together with Guggenheim Partners Investment Management LLC (collectively, Guggenheim), which agreed to pay a $15 million penalty; and U.S. Bancorp Investments Inc. (U.S. Bancorp) agreed to pay an $8 million penalty.
One firm, The Huntington Investment Company together with Huntington Securities Inc. and Capstone Capital Markets LLC (collectively, Huntington) self-reported its recordkeeping violations and agreed to pay a $1.25 million penalty. Grewal said its penalty was lower because of the self-reporting.
Each of the 16 firms was also ordered to cease and desist from future violations of the recordkeeping provisions and was censured; as well as to retain independent compliance consultants and to undergo a comprehensive review of their policies and procedures relating to electronic communication on personal devices and their policies for addressing non-compliance by employees.