Securities Fraud Blog
The Securities and Exchange Commission (SEC) recently announced significant penalties against sixteen firms for widespread recordkeeping failures, amounting to over $81 million in combined fines. Among the firms involved were Northwestern Mutual Investment Services LLC, Guggenheim Securities LLC, Oppenheimer & Co. Inc., Cambridge Investment Research Inc., Key Investment Services LLC, Lincoln Financial Advisors Corporation, U.S. Bancorp Investments Inc., and The Huntington Investment Company. The penalties stem from the firms’ failure to maintain and preserve electronic communications, a violation of federal securities laws. These actions highlight the SEC’s commitment to enforcing compliance with recordkeeping requirements essential for monitoring and enforcing securities laws.
Of particular note is The Huntington Investment Company’s case, which stands out due to its self-reporting and cooperation with the SEC. As a result, Huntington was ordered to pay a lower civil penalty compared to other firms, totaling $1.25 million. This demonstrates the importance of voluntary disclosure and cooperation in regulatory investigations.
The investigations uncovered widespread use of unapproved communication methods, such as personal text messages, across all sixteen firms. Employees at various levels, including supervisors and senior managers, were involved in these violations. The failure to maintain and preserve required records potentially deprived the SEC of crucial information in various investigations.
Each of the firms involved was charged with violating recordkeeping provisions of relevant securities laws and failing to reasonably supervise to prevent and detect such violations. In addition to the financial penalties, the firms were ordered to cease future violations, receive censures, and engage independent compliance consultants to review and enhance their policies and procedures.
Most securities brokerage firms and investment advisory firms prohibit texting between financial advisors and brokers and their customers because of the difficulty of supervising those communications. The reality is, however, that many brokers and advisors don’t follow these rules and often will send texts that can be used against them and their firms in related securities fraud actions. For this reason, customers who have been damaged by the wrongdoing of their advisors should take care to preserve all communications with their advisors including texts. If you believe you may have a claim against your financial advisor, broker, or their firm, please contact securities fraud attorney Scott Greco for a free attorney consultation.