Ameriprise, Edward Jones, and LPL Among 26 Firms Fined More Than $390 Million by SEC for Recordkeeping Failures
Ameriprise Financial Services LLC, Edward D. Jones & Co., L.P., and LPL Financial LLC were among 26 broker-dealers, investment advisers, and dually registered broker-dealers and investment advisers that the U.S. Securities and Exchange Commission charged yesterday with widespread and longstanding electronic and communications recordkeeping failures.
The firms admitted the facts set forth in their respective SEC orders, acknowledged that the conduct of their firm and personnel violated recordkeeping provisions of the federal securities laws, and agreed to pay combined civil penalties of $392.75 million. Each has also reportedly begun implementing improvements to their compliance policies and procedures to address these violations.
The firms and their penalties were:
- Ameriprise, $50 million;
- Edward Jones, $50 million;
- LPL, $50 million;
- Raymond James & Associates Inc., $50 million;
- RBC Capital Markets LLC, $45 million;
- BNY Mellon Securities Corporation, together with Pershing LLC, $40 million;
- TD Securities (USA) LLC, together with TD Private Client Wealth LLC and Epoch Investment Partners Inc., $30 million;
- Osaic Services Inc., together with Osaic Wealth Inc., $18 million;
- Cowen and Company LLC, together with Cowen Investment Management LLC, $16.5 million;
- Piper Sandler & Co., $14 million;
- First Trust Portfolios L.P., $8 million;
- Apex Clearing Corporation, $6 million;
- Truist Securities Inc., together with Truist Investment Services Inc. and Truist Advisory Services Inc., which self-reported, $5.5 million;
- Cetera Advisor Networks LLC, together with Cetera Investment Services LLC, which self-reported, $4.5 million;
- Great Point Capital LLC, $2 million;
- Hilltop Securities Inc., which self-reported, $1.6 million;
- P. Schoenfeld Asset Management LP, $1.25 million; and
- Haitong International Securities (USA) Inc., $400,000 penalty.
Three of the firms, as noted above, self-reported their violations and are paying lesser penalties as a result.
“As today’s enforcement actions against more than two dozen firms reflect, we remain committed to ensuring compliance with the books and records requirements of the federal securities laws, which are essential to investor protection and well-functioning markets,” said Gurbir S. Grewal, director of the SEC’s enforcement division. “Among this group of firms, there are several that differentiated themselves by self-reporting prior to the staff’s investigation, demonstrating once again the real benefits of proactive cooperation.”
Each of the SEC’s investigations uncovered pervasive 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.
SEC said that 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.
The firms were each charged with violating certain recordkeeping provisions of the Securities Exchange Act of 1934, the Investment Advisers Act of 1940, or both. The firms were also each charged with failing to reasonably supervise their personnel with a view to preventing and detecting those violations.
According to the LPL complaint, the SEC said that “from at least June 2019 (the ‘Relevant Period’), LPL personnel sent and received off-channel communications that were records required to be maintained under Exchange Act Rule 17a-4(b)(4) and/or Advisers Act Rule 204-2(a)(7). Respondent did not maintain or preserve the substantial majority of these written communications. Respondent’s failures were firm-wide, including financial advisers who, together with other personnel they supervised, were responsible for generating some of the highest levels of revenue for LPL during a time period within the Relevant Period. … Commission staff found LPL’s misconduct after commencing a risk-based initiative to investigate the use of off-channel and unpreserved communications at investment advisers. LPL has initiated a review of its recordkeeping failures and begun a program of remediation.”
In addition to the significant financial penalties, each of the firms was ordered to cease and desist from future violations of the relevant recordkeeping provisions and was censured.
Separately, the Commodity Futures Trading Commission announced settlements with The Toronto Dominion Bank, Cowen and Company, and Truist Bank for related conduct.
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