The Securities and Exchange Commission has unveiled penalties against another dozen firms as it continues its campaign against shortfalls in recordkeeping and digital communications in the wealth industry.
On Tuesday, the SEC announced it has charged 12 firms, including broker-dealers and investment advisers, for failing to maintain and preserve electronic communications, violating federal recordkeeping laws.
Eleven firms have agreed to pay a total of $88.2 million in penalties, while one firm, Qatalyst Partners, will not pay a penalty due to its self-reporting and compliance efforts.
The penalties are part of a broader SEC investigation into the pervasive use of off-channel communications, a thorny compliance issue across the US wealth industry and beyond.
According to the SEC, these firms admitted that their personnel, including senior management, used these methods for communications that were required to be preserved under securities laws. These failures, the SEC said, hindered its ability to access important records during investigations.
“Today’s enforcement actions reflect the range of remedies that parties may face for violating the recordkeeping requirements of the federal securities laws,” said Gurbir S. Grewal, director of the SEC’s enforcement division in a statement Tuesday. “Widespread and longstanding failures, including where those failures potentially hinder the Commission’s investor protection function, may result in robust civil penalties.”
Among the firms facing penalties, Stifel, Nicolaus & Company and Invesco Distributors, Inc. will each pay $35 million, the heftiest sums, while CIBC World Markets Corp. and its affiliate CIBC Private Wealth Advisors will pay $12 million. Their parent company CIBC, which is one of Canada's Big Six banks, is also paying an additional $30 million penalty to the CFTC over that pattern of behavior.
Canaccord Genuity and Regions Securities received reduced penalties of $1.25 million and $750,000, respectively, after self-reporting their violations.
Qatalyst Partners will not pay a penalty, having self-reported and taken corrective steps.
“Qatalyst took substantial steps to comply, self-reported, and remediated, and therefore received a no-penalty resolution,” Grewal said.
The SEC also mandated that 10 firms retain compliance consultants to review and enhance their policies on managing electronic communications on personal devices.
Today's action by the SEC extends its previous actions against off-channel communications and recordkeeping sweeps, including last month when it announced a landmark $390 million penalty against more than two dozen firms. Between the SEC and the CFTC, the enforcement blitz against recordkeeping violations has led to more than $3.28 billion in fines over the four years they've been ongoing.
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