Stifel Financial, Invesco fined $35M each by SEC for misuse of texting apps, in latest crackdown

Stifel Financial, Invesco Advisers and other big names in wealth management have agreed to pay hefty fines, after another Securities and Exchange Commission sweep totaling $88,225,000 of 11 firms charged with “widespread recordkeeping failures” related to off-channel texting communications and recordkeeping violations, according to the SEC.

Since 2020, Stifel advisors have communicated with businesses or clients using unapproved personal devices or off-channel services such as WhatsApp, according to the SEC.

Yesterday, the SEC announced charges against these 11 firms, which comprise broker-dealers, investment advisers, and one dually-registered broker-dealer and investment adviser, for longstanding failures by the firms and their personnel to maintain and preserve electronic communications in violation of recordkeeping provisions of the federal securities laws.

The announcement comes nearly five weeks after the SEC charged 26 investment advisers and broker-dealers with misuse of texting apps on Aug. 14, with charges totally $400 million. In that SEC sweep, Ameriprise, Edward Jones and Raymond James each agreed to pay a $50 million penalty.

Since 2021, the SEC has undertaken an enforcement campaign centering around investment advisors’ and broker-dealers’ recordkeeping practices, and kicked off its settlements in 2022 with $1.1 billion in fines against Goldman Sachs and Morgan Stanley.

In the latest SEC crackdown, the firms acknowledged their conduct violated recordkeeping provisions of the federal securities laws, agreed to pay civil penalties and have begun implementing improvements to their compliance policies and procedures to address these violations.

The firms, along with their fines, are:

• Stifel, Nicolaus & Company: $35 million
• Invesco Distributors, and Invesco Advisers: $35 million
• CIBC World Markets, and CIBC Private Wealth Advisors: $12 million
• Glazer Capital: $2 million
• Intesa Sanpaolo IMI Securities Corp.: $1.5 million
• Canaccord Genuity: $1.25 million
• Regions Securities: $750,000
• Alpaca Securities: $400,000
• Focused Wealth Management: $325,000

One additional firm – Qatalyst Partners – will not pay a penalty because it self-reported and demonstrated substantial efforts at compliance, according to the SEC.

“Today’s enforcement actions reflect the range of remedies that parties may face for violating the recordkeeping requirements of the federal securities laws. Widespread and longstanding failures, including where those failures potentially hinder the Commission’s investor protection function by compromising a firm’s response to SEC subpoenas, may result in robust civil penalties,” said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement. “On the other hand, firms that self-report and otherwise cooperate with the SEC’s investigations may receive significantly reduced penalties.”

The SEC’s investigation uncovered pervasive and longstanding use of unapproved communication methods, known as off-channel communications, at these firms. “The failure to maintain and preserve required records deprives the SEC of these communications in our investigations,” according to the SEC. “The failures involved personnel at multiple levels of authority, including supervisors and senior managers.”

Aside from Qatalyst, which self-reported violations, two additional firms, Canaccord and Regions, also self-reported and, as a result, will pay significantly lower civil penalties.

The 11 firms were each charged with violating certain recordkeeping provisions of the Securities Exchange Act or the Investment Advisers Act or both. In addition, all but one of the firms failed to reasonably supervise their personnel with a view to preventing and detecting those violations. The SEC’s order against Focused Wealth also found that the firm failed to adopt and implement policies and procedures reasonably designed to prevent the firm and its supervised persons from violating recordkeeping requirements.

Related: SEC fines 9 more investment advisors $1.2M, in ongoing marketing rule crackdown

Each of the firms was ordered to cease and desist from future violations of the relevant recordkeeping provisions. Ten of the firms also agreed to retain compliance consultants to conduct comprehensive reviews of their policies and procedures relating to the retention of electronic communications found on personal devices and their respective frameworks for addressing non-compliance by their personnel with those policies and procedures.