The SEC announced charges against 12 firms, including broker-dealers, investment advisers, and a dual-registered broker-dealer and investment adviser, for widespread and prolonged failures in the maintenance and preservation of electronic communications, violating the recordkeeping provisions of federal securities laws, according to the regulator’s statement.
The firms admitted to the facts outlined in their respective SEC orders, acknowledged that their conduct violated the recordkeeping provisions of federal securities laws, agreed to pay combined civil penalties totaling $88,225,000, and have begun implementing improvements to their compliance policies and procedures to address these violations.
The sanctioned firms are as follows: Stifel, Nicolaus & Company, which agreed to pay a $35 million fine; Invesco Distributors, along with Invesco Advisers, with a $35 million fine; CIBC World Markets, along with CIBC Private Wealth Advisors, which will pay $12 million; Glazer Capital with $2 million; Intesa Sanpaolo IMI Securities with $1.5 million; Canaccord Genuity with $1.25 million; Regions Securities will pay $750,000; Alpaca Securities with $400,000; Focused Wealth Management agreed to pay $325,000, and Qatalyst Partners will not pay any fine.
“Today’s enforcement actions reflect the range of consequences that parties can face for violating the recordkeeping requirements of federal securities laws. Widespread and long-standing failures, especially when they potentially impede the Commission’s investor protection function by compromising a firm’s response to SEC subpoenas, can result in substantial civil penalties,” commented Gurbir S. Grewal, Director of the SEC’s Division of Enforcement.
The SEC’s investigations into all the firms, except Qatalyst, uncovered widespread and long-standing use of unapproved communication methods, known as “off-channel communications,” within these firms.
On the other hand, firms that self-report and otherwise cooperate with the SEC’s investigations may receive significantly reduced penalties. In this case, despite recordkeeping failures involving senior management communications that persisted even after the SEC’s first recordkeeping matters were announced in 2021, Qatalyst took significant compliance steps, self-reported, and remedied the situation, resulting in a no-penalty resolution.
As outlined in the SEC’s orders, the firms admitted that during the relevant periods, their personnel sent and received off-channel communications that should have been retained as required under securities laws. The failure to maintain and preserve these records deprived the SEC of key communications during its investigations.
