SEC Fines 11 Firms Over $88 Million for Recordkeeping Violations

September 24, 2024

What happened?

On September 24, 2024, the SEC announced charges against 12 firms, including broker-dealers, investment advisers, and one dually-registered broker-dealer and investment adviser, for “widespread and longstanding failures by the firms and their personnel to maintain and preserve electronic communication in violation of recordkeeping provisions of the federal securities laws,” according to a SEC press release.

In total, the firms agreed to pay combined civil penalties of $88,225,000 and, per the release, have begun implementing improvements to their compliance policies and procedures to address the violations.

The firms and associated penalties are as follows:

• Stifel, Nicolaus & Company, Inc. agreed to pay a $35 million penalty;
• Invesco Distributors, Inc., together with Invesco Advisers, Inc., agreed to pay a $35 million penalty;
• CIBC World Markets Corp., together with CIBC Private Wealth Advisors, Inc., agreed to pay a $12 million penalty;
• Glazer Capital, LLC agreed to pay a $2 million penalty;
• Intesa Sanpaolo IMI Securities Corp., agreed to pay a $1.5 million penalty;
• Canaccord Genuity LLC agreed to pay a $1.25 million penalty;
• Regions Securities LLC agreed to pay a $750,000 penalty;
• Alpaca Securities LLC agreed to pay a $400,000 penalty;
• Focused Wealth Management, Inc. agreed to pay a $325,000 penalty; and
• Qatalyst Partners LP will not pay a penalty.

Aside from Qatalyst, the investigation uncovered “pervasive and longstanding” use of unapproved communications methods, known as off-channel communications. During the periods relevant to the order, the firms admitted that their personnel sent and received off-channel communications that were required to be maintained under securities laws but did not. Failures involved personnel at multiple levels of authority, including supervisors and senior managers.

The firms were each charged with violating certain recordkeeping provisions of the Securities Exchange Act or the Investment Advisers Act or both.

What does this mean for me?

There have been several recent enforcement actions for off-channel communications, making it clear that this remains a priority for the SEC. Given the various kinds of off-channel communications covered under relevant laws (personal text messaging, social media messaging, and more), advisers need to ensure they have a comprehensive program in place for recording and archiving covered communications.

Our Adviser Guide to Managing Off-Channel Communications is a helpful resource that includes an overview of recent SEC requests and enforcement actions, as well as tips for strengthening your communications program. To access that, click here.

Still have questions? Let us know, and one of our regulatory experts will contact you soon.