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Guggenheim Securities Slapped by SEC for Violating Whistleblower Rules

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What You Need to Know

  • The Guggenheim training manual forbade employees from communicating directly with the SEC.
  • SEC ordered Guggenheim Securities to pay a civil money penalty.
  • SEC acknowledged that there was no evidence that Guggenheim Securities impeded whistleblower communications, if any, the BD said.

Guggenheim Securities was slapped with a civil money penalty of $208,912 by the Securities and Exchange Commission Wednesday for violating Dodd-Frank whistleblower rules.

According to the SEC’s order, Guggenheim Securities — which has more than 600 registered representatives and 16 branches — included language in its compliance training materials that prohibited employees from initiating contact with any regulator without prior approval from the broker-dealer’s legal or compliance department.

Guggenheim Securities is a Delaware limited liability company with its principal place of business in New York, and is majority indirect owned by Guggenheim Capital.

By prohibiting employees from initiating contact with any regulator without prior approval from the legal or compliance department, the SEC states in its order that Guggenheim “undermines the purpose of Section 21F and Rule 21F-17(a) to ‘encourage[e] individuals to report to the Commission.’”

The Dodd-Frank Wall Street Reform and Consumer Protection Act amended the Exchange Act by adding Section 21F, “Whistleblower Incentives and Protection.”

The provisions were designed to encourage whistleblowers to report possible securities law violations by providing, among other things, financial incentives and various confidentiality protections.

To fulfill the law’s purpose, the SEC adopted Rule 21F-17, which provides in relevant part that: “No person may take any action to impede an individual from communicating directly with the Commission staff about a possible securities law violation, including enforcing, or threatening to enforce, a confidentiality agreement … with respect to such communications.”

From at least April 15, 2016, to July 2020, the SEC order states, the Guggenheim Securities Manual contained a “Communications with Regulators” section that stated:

“Employees are also strictly prohibited from initiating contact with any Regulator without prior approval from the Legal or Compliance Department. This prohibition applies to any subject matter that might be discussed with a Regulator, including an individual’s registration status with FINRA. Any employee that violates this policy may be subject to disciplinary action by the Firm.”

Guggenheim Securities said Wednesday in a statement shared with ThinkAdvisor that “We are pleased to resolve the matter. Guggenheim Securities has always sought to protect whistleblower rights, and we note that the SEC acknowledged in this settlement that there was no evidence that Guggenheim Securities impeded whistleblower communications, if any.”