The Securities and Exchange Commission (SEC) announced charges against 26 broker-dealers, investment advisers, and dually-registered firms for widespread and longstanding failures to maintain and preserve electronic communications. The firms admitted to the violations, agreed to pay combined civil penalties of $392.75 million, and have begun implementing improved compliance policies and procedures.
Firms and Penalties
The firms charged and their respective penalties are listed, including Ameriprise Financial Services ($50 million), Edward D. Jones & Co. ($50 million), LPL Financial LLC ($50 million), Raymond James & Associates ($50 million), RBC Capital Markets ($45 million), and others. Three firms self-reported their violations and received lower penalties.
Violations and Consequences
The investigations uncovered pervasive and longstanding use of unapproved communication methods, known as off-channel communications, at these firms. The firms admitted that their personnel sent and received off-channel communications, including text messages and other personal device communications methods, that were required records under securities laws. The failure to maintain and preserve these records deprived the SEC of these communications in its investigations. The violations involved personnel at multiple levels, including supervisors and senior managers.
Charges and Orders
The firms were charged with violating recordkeeping provisions of the Securities Exchange Act, the Investment Advisers Act, or both, and with failing to reasonably supervise their personnel. Each firm was ordered to cease and desist from future violations, was censured, and agreed to pay the respective civil penalties.
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