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February 09, 2024 at 09:31 AM
The Securities and Exchange Commission said Friday that it has charged five broker-dealers, seven dually registered broker-dealers and investment advisors, and four affiliated investment advisors for widespread and longstanding failures by the firms and their employees to maintain and preserve electronic communications, including WhatsApp messages and texts.
The 16 firms agreed to pay combined civil penalties of more than $81 million, admitted the facts set forth in their respective SEC orders, and acknowledged that their conduct violated recordkeeping provisions of the federal securities laws.
The firms have begun implementing improvements to their compliance policies and procedures to address the violations.
The charges are as follows:
- Northwestern Mutual Investment Services LLC (NMIS), together with Northwestern Mutual Investment Management Co. LLC (NMIM) and Mason Street Advisors LLC, agreed to pay a $16.5 million penalty;
- Guggenheim Securities LLC, together with Guggenheim Partners Investment Management LLC (GPIM), agreed to pay a $15 million penalty;
- Oppenheimer & Co. Inc. agreed to pay a $12 million penalty;
- Cambridge Investment Research Inc., together with Cambridge Investment Research Advisors Inc., agreed to pay a $10 million penalty;
- Key Investment Services LLC (KIS), together with KeyBanc Capital Markets Inc., agreed to pay a $10 million penalty;
- Lincoln Financial Advisors Corp., together with Lincoln Financial Securities Corp., agreed to pay an $8.5 million penalty;
- U.S. Bancorp Investments Inc. agreed to pay an $8 million penalty; and
- The Huntington Investment Company (HIC), together with Huntington Securities, Inc. (HSI) and Capstone Capital Markets LLC, which self-reported, agreed to pay a $1.25 million penalty.
“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 Grewal, director of the SEC’s Division of Enforcement. “Once again, one of these orders is not like the others: Huntington’s penalty reflects its voluntary self-report and cooperation.”
According to the SEC, investigations conducted by the agency uncovered pervasive and longstanding uses of unapproved communication methods, known as off-channel communications, at all 16 firms.
As described in the SEC’s orders, the broker-dealer firms admitted that, from at least 2019 or 2020, their employees communicated through personal text messages about the business of their employers.
The investment advisor firms admitted that their employees “sent and received off-channel communications related to recommendations made or proposed to be made and advice given or proposed to be given,” the SEC said.
