Stifel and Invesco will pay $35 million each to settle SEC charges that the firms failed to properly retain reps’ off-channel electronic communications.
Additionally, nine other firms settled similar charges in the latest volley of affected firms. The total penalties among the eleven firms is $88 million.
In addition to Stifel and Invesco, CIBC World Markets will pay a $12 million penalty, 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.
Notably, Qatalyst Partners also settled similar charges but will not pay the penalty because the firm conducted its own investigation after 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 skirted monetary penalties altogether by self-reporting “despite recordkeeping failures that involved communications by senior leadership.”
“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 spokesperson said the firm “takes compliance matters incredibly seriously” and was pleased to resolve the matter.
“We have already taken significant steps to further strengthen the firm’s compliance processes related to record-keeping electronic communications,” the Invesco spokesperson said.
According to the Stifel settlement (which largely mirrors the other settlements), the firm had policies in place to retain business-related records (including electronic communications), including counseling its personnel, as well as monitoring through “firm-approved” communication methods (notably, this didn’t include unapproved methods or apps such as WhatsApp, according to the SEC).
“While permitting personnel to use approved communications methods for business communications, Stifel failed to implement sufficient monitoring to ensure that its recordkeeping and communications policies were being followed,” the settlement read.
The off-channel communications trail goes back to at least January 2020 and continues past the SEC's 2021 risk-based initiative to investigate registrants’ retention of off-channel comms. Stifel cooperated with the investigation, which uncovered “pervasive” off-channel communications “at various seniority levels” in Stifel.
Examples include a Stifel desk head who spoke off-channel about the b/d’s business with at least 15 colleagues (including managing directors and global heads) and about 10 brokerage customers, investors or marketing participants. Another executive spoke off-channel with six colleagues (including financial advisors) and one brokerage customer, according to the commission.
Each firm agreed to a cease-and-desist, and 10 of the 11 agreed to hire a third-party compliance consultant to look into their policies and procedures on off-channel communications.
In 2022, the commission charged some of the biggest names in financial services (including Morgan Stanley, UBS, Bank of America and Citigroup) $1.1 billion to settle charges of “widespread and long-standing failures” in firms’ supervision of off-channel communications.
The SEC has charged numerous firms for similar violations over the years. Last month, 26 b/ds and RIAs, including Raymond James, LPL, Edward Jones and Osaic, agreed to pay a combined $392.75 million in penalties to settle SEC charges on paltry off-channel comms compliance.
