The SEC has charged 26 broker-dealers, investment advisers, and dually-registered broker-dealers a combined $392.75 million for widespread recordkeeping failures.
The firms were found to have longstanding failures related to maintaining and preserving electronic communications by their personnel.
The charge specifically relates to “violating certain recordkeeping provisions of the Securities Exchange Act, the Investment Advisers Act, or both [and] the firms were also each charged with failing to reasonably supervise their personnel with a view to preventing and detecting those violations,” said the watchdog.
The firms which received the highest penalties of $50 million were: Ameriprise Financial Services, Edward D. Jones & Co, LPL Financial, Raymond James & Associates.
In addition, RBC Capital Markets agreed to pay a $45 million penalty, BNY Mellon Securities Corporation (together with Pershing LLC) agreed to pay $40 million, and TD Securities USA (together with TD Private Client Wealth LLC and Epoch Investment Partners) agreed to pay a $30 million penalty.
Gurbir Grewal, director of the SEC division of enforcement, asserted: “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.”
Of the 26, three firms received credit for self-reporting and as a result will pay reduced civil penalties.
These firms are: Truist Securities (together with Truist Investment Services and Truist Advisory Services) which agreed to pay a $5.5 million penalty, Cetera Advisor Networks (together with Cetera Investment Services) which will pay $4.5 million, and Hilltop Securities which agreed to pay $1.6 million.
Grewal highlighted how this reward for reporting prior to staff’s investigation demonstrated “once again” the empirical benefits of cooperating proactively.
The other charged entities were charged with penalties between $18 million and $400,000: Osaic Services, together with Osaic Wealth ($18 million); Cowen and Company, together with Cowen Investment Management ($16.5 million); Piper Sandler & Co ($14 million); First Trust Portfolios ($8 million); Apex Clearing Corporation ($6 million); Great Point Capital ($2 million); P. Schoenfeld AM ($1.25 million); Haitong International Securities USA ($400,000).
Addressing the specifics of the charged, the regulator added that the investigations “uncovered pervasive and longstanding use of unapproved communication methods, known as off-channel communications, at these firms. As described in the SEC’s orders, the firms admitted that, during the relevant periods, their personnel sent and received off-channel communications that were records required to be maintained under the securities laws.”
The SEC added that the failures involved individuals at multiple levels of authority, including supervisors and senior managers.
Following the conclusion of the investigation and charge of financial penalities, the firms in question were ordered to cease and desist from future violations and have now begun implementing improvements to compliance policies and procedures.
Read more: SEC orders Senvest Management to pay $6.5 million penalty for recordkeeping failures
Elsewhere, the Commodity Futures Trading Commission (CFTC) has announced settlements with The Toronto Dominion Bank, Cowen and Company, and Truist Bank for ‘related conduct’.