FINRA Charges Multiple Firms for Communication Failures

Posted on April 2nd, 2024 at 10:04 AM
FINRA Charges Multiple Firms for Communication Failures

From the desk of Jim Eccleston at Eccleston Law 

FINRA has penalized several broker-dealers and investment advisors for widespread and longstanding failures to maintain and preserve electronic communications, including WhatsApp messages and texts. As reported by ThinkAdvisor, the firms have agreed to pay combined civil penalties totaling over $81 million, acknowledging violations of recordkeeping provisions of federal securities laws.

The firms include:

  • Northwestern Mutual Investment Services LLC (NMIS), Northwestern Mutual Investment Management Co. LLC (NMIM), and Mason Street Advisors LLC: $16.5
    million penalty.
  • Guggenheim Securities LLC and Guggenheim Partners Investment Management LLC (GPIM): $15 million penalty.
  • Oppenheimer & Co. Inc.: $12 million penalty.
  • Cambridge Investment Research Inc. and Cambridge Investment Research Advisors Inc.: $10 million penalty.
  • Key Investment Services LLC (KIS) and KeyBanc Capital Markets Inc.: $10 million penalty.
  • Lincoln Financial Advisors Corp. and Lincoln Financial Securities Corp.: $8.5 million penalty.
  • U.S. Bancorp Investments Inc.: $8 million penalty.
  • The Huntington Investment Company (HIC), Huntington Securities, Inc. (HSI), and Capstone Capital Markets LLC: $1.25 million penalty (self-reported).

According to the SEC, investigations revealed widespread use of unapproved communication methods, known as off-channel communications, across all 16 firms. Employees were found to have used personal text messages to discuss business matters, violating compliance policies.

Several firms were charged with violating certain recordkeeping provisions of the Securities Exchange Act of 1934 and with failing to reasonably supervise to prevent and detect those violations. Other firms were charged with violating certain recordkeeping provisions of the Investment Advisers Act of 1940 and with failing to reasonably supervise to prevent and detect those violations.

In addition to the significant financial penalties, each firm was ordered to desist from future violations of the relevant recordkeeping provisions and was censured. The firms also agreed to retain independent compliance consultants to, among other things, 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 employees with those policies and procedures, the SEC explained.


Eccleston Law LLC represents investors and financial advisors nationwide in securities, employment, transition, regulatory, and disciplinary matters.

Tags: eccleston, eccleston law, finra

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