The Securities and Exchange Commission (SEC) has charged 12 financial firms for recordkeeping violations.
The 12 financial firms, which include broker-dealers, investment advisers, and one dually registered broker-dealer and investment adviser, were cited for widespread and longstanding failures to maintain and preserve electronic communications in violation of federal securities laws.
The firms acknowledged that their conduct violated recordkeeping provisions of the federal securities and agreed to pay combined civil penalties of $88,225,000. They have also begun implementing improvements to their compliance policies and procedures to address these violations.
The firms that were charged include:
• Stifel, Nicolaus & Company, which agreed to pay a $35 million penalty;
• Invesco Distributors, together with Invesco Advisers, which agreed to pay a $35 million penalty;
• CIBC World Markets, together with CIBC Private Wealth Advisors, which agreed to pay a $12 million penalty;
• Glazer Capital, which agreed to pay a $2 million penalty;
• Intesa Sanpaolo IMI Securities, which agreed to pay a $1.5 million penalty;
• Canaccord Genuity, which agreed to pay a $1.25 million penalty;
• Regions Securities, which agreed to pay a $750,000 penalty;
• Alpaca Securities, which agreed to pay a $400,000 penalty;
• Focused Wealth Management, which agreed to pay a $325,000 penalty; and
• Qatalyst Partners, which will not pay a penalty.
“Today’s enforcement actions reflect the range of remedies that parties may face for violating the recordkeeping requirements of the federal securities laws. Widespread and longstanding failures, including where those failures potentially hinder the Commission’s investor protection function by compromising a firm’s response to SEC subpoenas, may result in robust civil penalties,” Gurbir Grewal, director of the SEC’s Division of Enforcement, said. “On the other hand, firms that self-report and otherwise cooperate with the SEC’s investigations may receive significantly reduced penalties. Here, despite recordkeeping failures that involved communications by senior leadership and persisted after our first recordkeeping matters were announced in 2021, Qatalyst took substantial steps to comply, self-reported, and remediated and, therefore, received a no-penalty resolution.”
The SEC’s investigations into all the firms except for Qatalyst uncovered pervasive and longstanding use of unapproved communication methods, known as off-channel communications. The firms admitted that during the periods relevant to each order, their personnel sent and received off-channel communications that were required to be maintained. The failures involved personnel at multiple levels of authority, including supervisors and senior managers.
Qatalyst will not pay a penalty because it self-reported its recordkeeping violations, cooperated with the staff’s investigation, and demonstrated substantial efforts at compliance with the recordkeeping requirements. Further, Canaccord and Regions, also self-reported their violations and, as a result, will pay significantly lower civil penalties than they would have otherwise.
Each of the firms was censured and ordered to cease and desist from future violations. Ten of the firms also agreed to retain compliance consultants to conduct reviews of their policies for retaining electronic communications found on personal devices and address non-compliance by their personnel.
Separately, the Commodity Futures Trading Commission announced a settlement with Canadian Imperial Bank of Commerce for related conduct.