On August 14, 2024, the Securities and Exchange Commission today announced charges against 26 firms for widespread and longstanding failures by the firms and their personnel to maintain and preserve electronic communications. Ameriprise Financial Services, LLC; Edward D. Jones & Co., L.P.; LPL Financial LLC; Raymond James & Associates, Inc.; RBC Capital Markets, LLC; BNY Mellon Securities Corporation; Pershing LLC; TD Securities (USA) LLC; TD Private Client Wealth LLC; Epoch Investment Partners, Inc.; Osaic Services, Inc.; Osaic Wealth, Inc.; Cowen and Company, LLC; Cowen Investment Management LLC; Piper Sandler & Co.; First Trust Portfolios L.P.; Apex Clearing Corporation; Truist Securities, Inc.; Truist Investment Services, Inc.; Truist Advisory Services, Inc.; Cetera Advisor Networks LLC; Cetera Investment Services LLC; Great Point Capital, LLC; Hilltop Securities Inc.; P. Schoenfeld Asset Management LP; Haitong International Securities (USA) Inc. were all sanctioned for their misconduct.
In October 2022, the SEC staff commenced a risk-based initiative to investigate whether investment advisers were properly maintaining communications that they required to preserve as records under the Advisers Act. The firms cooperated with the investigation. The SEC’s individual investigations found extensive and longstanding use of unapproved communication methods, known as off-channel communications, at these firms. As described in the SEC’s orders, the firms admitted that, during the relevant periods, their personnel sent and received off-channel communications that were records required to be maintained under the securities laws. The failure to maintain and preserve required records deprives the SEC of these communications in its investigations. The failures involved personnel at multiple levels of authority, including supervisors and senior managers. For instance, one financial advisor wrote to a colleague, using an unapproved platform, to ask him to execute an unsolicited trade requested by a customer. On another occasion, a private wealth advisor and colleague exchanged text messages on an unapproved platform concerning customer brokerage account documents.
According to the firms’ respective SEC orders, they admitted and acknowledged that their conduct violated recordkeeping provisions of the federal securities laws. The firms agreed to pay combined civil penalties of $392.75 million and have begun implementing improvements to their compliance policies and procedures to address these violations.
In summary, the firms were penalized as follows:
- Ameriprise Financial Services, LLC agreed to pay a $50 million penalty
- Edward D. Jones & Co., L.P. agreed to pay a $50 million penalty
- LPL Financial LLC agreed to pay a $50 million penalty
- Raymond James & Associates, Inc. agreed to pay a $50 million penalty
- RBC Capital Markets, LLC agreed to pay a $45 million penalty
- BNY Mellon Securities Corporation, together with Pershing LLC, agreed to pay a $40 million penalty
- TD Securities (USA) LLC, together with TD Private Client Wealth LLC and Epoch Investment Partners, Inc., agreed to pay a $30 million penalty
- Osaic Services, Inc., together with Osaic Wealth, Inc., agreed to pay an $18 million penalty
- Cowen and Company, LLC, together with Cowen Investment Management LLC, agreed to pay a $16.5 million penalty
- Piper Sandler & Co. agreed to pay a $14 million penalty
- First Trust Portfolios L.P. agreed to pay an $8 million penalty
- Apex Clearing Corporation agreed to pay a $6 million penalty
- Truist Securities, Inc., together with Truist Investment Services, Inc. and Truist Advisory Services, Inc., which self-reported, agreed to pay a $5.5 million penalty
- Cetera Advisor Networks LLC, together with Cetera Investment Services LLC, which self-reported, agreed to pay a $4.5 million penalty
- Great Point Capital, LLC agreed to pay a $2 million penalty
- Hilltop Securities Inc., which self-reported, agreed to pay a $1.6 million penalty
- Schoenfeld Asset Management LP agreed to pay a $1.25 million penalty
- Haitong International Securities (USA) Inc. agreed to pay a $400,000 penalty
The firms were each charged with violating certain recordkeeping provisions of the Securities Exchange Act, the Investment Advisers Act, or both. The firms were also each charged with failing to reasonably supervise their personnel with a view to preventing and detecting those violations.
Harmed investors can call (954) 693-7577 or email [email protected] to discuss their legal options. All consultations are free and confidential. Most cases are handled on a contingency fee basis, meaning that clients are not obligated to pay attorney fees unless money is recovered on their behalf.