Stifel and Invesco will pay $35 million each to settle SEC allegations that the firms failed to properly keep electronic communications outside the proxy channel.
In addition, nine other firms filed similar charges in the latest round of affected firms. The total penalties among the eleven firms are $88 million.
Besides Stifel AND InvescoCIBC World Markets will pay a penalty of $12 million, Glazer Capital $2 million, Intesa Sanpaolo IMI Securities $1.5 million and Canaccord Genuity $1.25 million. Regions Securities, Alpaca Securities and Focused Wealth Management will pay $750,000, $400,000 and $325,000 respectively.
In particular, Qatalyst Partners also settled similar charges but will not pay the fine because the firm conducted its own investigation following recent SEC actions on similar charges and self-reported its findings (Canaccord Genuity and Regions Securities also self-reported).
In a statement about the settlements, SEC Enforcement Director Gurbir Grewal noted that Qatalyst waived the monetary penalties by self-reporting “despite recordkeeping failures that included communications from senior management.”
“Today's enforcement actions reflect the range of remedies that parties may face for violating the recordkeeping requirements of the federal securities laws,” Grewal said.
Stifel declined to comment for this story. An Invesco spokesman said the firm “takes compliance issues extremely seriously” and was pleased to resolve the matter.
“We have already taken significant steps to further strengthen the firm's compliance processes regarding the retention of electronic communications records,” the Invesco spokesperson said.
According to the Stifel settlement (which largely mirrors other settlements), the firm had policies to preserve business-related data (including electronic communications), including counseling its personnel, as well as monitoring through methods of communication “approved by the firm “. specifically, this does not include unapproved methods or applications such as WhatsApp, according to the SEC).
“While allowing personnel to use approved communication methods for business communications, Stifel failed to implement sufficient monitoring to ensure that its record retention and communication policies were being followed,” the settlement said.
The out-of-channel communication trail goes back to at least January 2020 and continues after the SEC's 2021 risk-based initiative to investigate the retention of out-of-channel communications by registrars. Stifel cooperated with the investigation, which found “widespread” out-of-channel communications “at various levels of seniority” at Stifel.
Examples include a Stifel executive who spoke outside the channel about the eb/d business to at least 15 colleagues (including managing directors and global leaders) and about 10 customers, investors or marketing participants. Another executive spoke outside the channel with six colleagues (including financial advisers) and a brokerage client, according to the commission.
Each firm agreed to cease and desist, and 10 of the 11 agreed to hire a third-party compliance consultant to review their policies and procedures for out-of-channel communications.
In 2022, commission in charge some of the biggest names in financial services (including Morgan Stanley, UBS, Bank of America and Citigroup) $1.1 billion to settle allegations of “widespread and long-standing failures” in the oversight of out-of-channel communications firms.
The SEC has charged many firms with similar violations over the years. Last month26 b/ds and RIAs, including Raymond James, LPL, Edward Jones and Osaic, agreed to pay $392.75 million in combined penalties to settle SEC charges for minor compliance of out-of-channel communications.