SEC charges 26 firms with recordkeeping failures, orders almost $393M in civil penalties

The Securities and Exchange Commission (SEC) on Aug. 14 announced charges against 26 broker-dealers, investment advisers, and dually registered broker-dealers and investment advisers for widespread, ongoing failures to maintain and preserve electronic communications.

“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 Grewal, director of the SEC’s Division of Enforcement.

All of the firms admitted the facts set forth in their respective SEC orders and acknowledged that their conduct violated recordkeeping provisions of the federal securities laws.

They also agreed to pay combined civil penalties of $392.75 million, and have started implementing improvements to their compliance policies and procedures to address the violations, according to the SEC.

Three firms self-reported their violations and will pay significantly lower civil penalties than they would have otherwise, the commission said.

“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,” Grewal said.

The 26 firms and their penalties are:

• 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 Corp., 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 Co. 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 Corp. 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 L.P. agreed to pay a $1.25 million penalty; and
• Haitong International Securities (USA) Inc. agreed to pay a $400,000 penalty.

Each of the SEC’s investigations uncovered “pervasive and long-standing use of unapproved communication methods,” known as off-channel communications, at these firms, said the commission.

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, and the SEC said that the failure to maintain and preserve such required records deprived the commission of these communications in its investigations.

The failures involved personnel at multiple levels of authority, including supervisors and senior managers, added the SEC.

The firms were each charged with violating certain recordkeeping provisions of the Securities Exchange Act, the Investment Advisers Act, or both, and each was also charged with failing to reasonably supervise their personnel with a view to preventing and detecting the violations.

In addition to the financial penalties, each firm must cease and desist from future violations of the relevant recordkeeping provisions, and each has been censured, said the SEC.

Separately, the Commodity Futures Trading Commission announced settlements with The Toronto Dominion Bank, Cowen and Co., and Truist Bank for related conduct.

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