SEC Charges 12 Financial Firms for Recordkeeping Failures

 The firms will pay a total of $88.2 million in civil penalties.

The Securities and Exchange Commission announced charges on Tuesday against 12 financial firms for failing to properly maintain and preserve electronic communications, violating federal securities recordkeeping laws. The firms acknowledged their conduct violated recordkeeping provisions of the federal securities laws, agreed to pay combined civil penalties totaling $88.2 million, according to the SEC.

The SEC’s investigation uncovered widespread and longstanding noncompliance, involving the use of unapproved communication methods that prevented regulators from accessing essential records. The charged firms include broker/dealers, investment advisers and one dually registered broker/dealer and investment adviser.

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The penalties varied for each firm, with Stifel, Nicolaus & Co. Inc., Invesco Distributors Inc. and Invesco Advisers Inc. paying the highest fines of $35 million each. Other firms agreeing to penalties included:

  • CIBC World Markets Corp. and CIBC Private Wealth Advisors Inc.: $12 million;
  • Glazer Capital LLC: $2 million;
  • Intesa Sanpaolo IMI Securities Corp.: $1.5 million;
  • Canaccord Genuity LLC: $1.25 million;
  • Regions Securities LLC: $750,000;
  • Alpaca Securities LLC: $400,000; and
  • Focused Wealth Management Inc.: $325,000.

The SEC’s investigation revealed that personnel at multiple levels of these firms, including senior leadership, used unauthorized communication channels (often referred to as “off-channel communications”) which were not preserved as required by law. These communications, which should have been maintained under federal securities laws, were missing from the records, hindering the SEC’s ability to access them during investigations.

According to the SEC’s statement, a 12th firm, Qatalyst Partners LP, will not pay any penalties due to its proactive approach in addressing the violations. Two other firms, Canaccord and Regions, also self-reported their violations, which led to reduced fines.

“Firms that self-report and otherwise cooperate with the SEC’s investigations may receive significantly reduced penalties,” Gurbir Grewal, director of the SEC’s Division of Enforcement, said in a statement. “Here, despite recordkeeping failures that involved communications by senior leadership and persisted after our first recordkeeping matters were announced in 2021, Qatalyst took substantial steps to comply, self-reported and remediated and, therefore, received a no-penalty resolution.”

The SEC’s order further revealed that 11 of the firms not only violated recordkeeping laws, but also failed to properly supervise their personnel to prevent these violations. Focused Wealth Management was found to lack appropriate policies and procedures designed to ensure compliance with recordkeeping requirements.

As part of the resolution, all firms were censured and ordered to follow the relevant recordkeeping provisions. Ten of the firms will also hire compliance consultants to review their policies and procedures regarding electronic communications and to address any noncompliance among personnel.

In a related development, the Commodity Futures Trading Commission reached a settlement with the Canadian Imperial Bank of Commerce for similar recordkeeping failures.

The SEC’s investigations were led by teams across multiple regional offices, including the New York, Fort Worth and Chicago divisions.

Empower Acquires Equity Compensation Platform OptionTrax

The deal expands Empower’s services into equity compensation administration and management.

Empower, a retirement and wealth management services provider, has acquired Plan Management Corp., the developer of OptionTrax, a digital platform for workplace equity plan administration.

Based in West Conshohocken, Pennsylvania, PMC’s technology, proprietary products, services, intellectual property, licenses and contracts are now wholly owned by Empower under the terms of the agreement announced on Monday. The firms did not disclose terms of the deal.

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OptionTrax specializes in solutions for administering and managing equity compensation, including stock options and restricted stock units. OptionTrax also supports plan design, grant management, financial reporting, vesting schedules and tax calculations.

The firm services more than 300 employers and manages about $62 billion in equity compensation plans.

“There’s significant unmet demand for equity compensation services,” Jonathan Miller, PMC’s founder, said in a statement. “By leveraging Empower’s scale and distribution network, we’ll be able to extend OptionTrax’s innovative offerings to a broader range of employers.”

Along with the acquisition, Empower has launched Empower Stock Plan Services LLC, led by Dave Gray, its executive vice president for enterprise solutions. Gray noted that many 401(k) clients have expressed interest in equity compensation services, and this acquisition reflects Empower’s continued expansion of its workplace benefits and wealth management offerings.

“Empower believes advisers and consultants will welcome the chance to work with Empower’s OptionTrax platform,” says Gray. “Our focus on multiple markets—across both publicly held and private corporates of all sizes—is unlike some other providers who choose to focus on only some segments.”

Following the acquisition, OptionTrax will be rebranded as “OptionTrax by Empower.” The firm’s services will also be integrated into Empower’s digital platform, expanding users’ ability to manage and view their full financial situation including equity compensation programs.

“We believe that consultants serving larger corporate clients will welcome our integrated workplace and financial planning experience for participants,” says Gray. “In addition, the delivery of equity compensation solutions will be additive to conversations between advisers serving smaller corporate plans, Empower and our shared clients.”

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