Financial Institution Fraud

February 9, 2024

Five broker-dealers, seven dually registered broker-dealers and investment advisers, and four affiliated investment advisors have been ordered to pay more than $81 million in total for longstanding, widespread violations of the recordkeeping provisions of the Investment Advisers Act of 1940.  The firms were found to have failed to maintain and preserve electronic communications since at least 2019.  The firms include Northwestern Mutual Investment Services LLC, Northwestern Mutual Investment Management Co. LLC, and Mason Street Advisors LLC, who will pay $16.6 million; Guggenheim Securities LLC and Guggenheim Partners Investment Management LLC, who will pay $15 million; Oppenheimer & Co. LLC, who will pay $12 million; Cambridge Investment Research Inc. and Cambridge Investment Research Advisors Inc., who will pay $10 million; Key Investment Services LLC and KeyBanc Capital Markets Inc., who will pay $10 million; Lincoln Financial Advisors Corp. and Lincoln Financial Securities Corp., who will pay $8.5 million; U.S. Bancorp Investments Inc., who will pay $8 million; and The Huntington Investment Company, Huntington Securities Inc., and Capstone Capital Markets LLC, who will pay $1.25 million.  SEC

December 13, 2023

Credit Suisse Securities (USA) LLC and two affiliates will pay more than $10 million for providing prohibited underwriting and advising services to mutual funds, in violation of an October 2022 Superior Court of New Jersey consent order. Per the order, Credit Suisse was prohibited from serving as principal underwriter or investment adviser to mutual funds and employees' securities companies; however, Credit Suisse acted in that capacity prior to receiving a time-limited exemption to such prohibitions in June 2023. SEC

November 2, 2023

Royal Bank of Canada has agreed to pay a $6 million civil penalty to the SEC to settle charges of violating the internal accounting controls and books and records provisions of the Securities Exchange Act.  Between 2008 and 2020, the firm failed to properly account for the costs of internally developed software.  Because it was unable to differentiate between capitalizable and noncapitalizable costs, the bank applied a single capitalization rate year after year without sufficient basis.  SEC

September 29, 2023

Goldman Sachs, J.P. Morgan, and Bank of America and Merrill Lynch have been ordered to pay $30 million, $15 million, and $8 million respectively in connection with a variety of swap dealer failures.  Goldman Sachs failed to diligently supervise a wide range of its swap dealer activities, some of them since 2013, and failed to accurately or timely report a significant portion of its swap data.  J.P. Morgan underreported or misreported over 40 million swap transactions.  Bank of America and Merrill Lynch underreported or misreported almost 4 million swap transactions.  CFTC

September 29, 2023

Interactive Brokers Corp., an introducing broker, and Interactive Brokers LLC, a futures commission merchant, has been ordered to pay $20 million to the CFTC and $35 million to the SEC to resolve charges of failing to maintain and preserve records.  The records included communications through unapproved channels, such as text and WhatsApp, which employees at all levels used and which the company failed to maintain and preserve.  The SEC also resolved charges against other firms for similar misconduct, including Robert W. Baird & Co. Inc. ($15 million); William Blair & Company LLC and William Blair Investment Management LLC ($10 million); Nuveen Securities LLC ($8.5 million); Fifth Third Securities Inc. ($8 million); and Perella Weinberg Partners LP, Tudor, Pickering, Holt & Co. Securities LLC, and Perella Weinberg Partners Capital Management LP ($2.5 million).  CFTC; SEC

September 25, 2023

Investment adviser DWS Investment Management Americas Inc. (DIMA), a subsidiary of Deutsche Bank AG, has agreed to pay $25 million to settle two separate enforcement actions.  In the first action, DIMA was found to have failed to develop and implement an anti-money laundering (AML) program to comply with the Bank Secrecy Act and Financial Crimes Enforcement Network regulations.  In the second action, DIMA was found to have made materially misleading statements about how it managed its Environmental, Social, and Governance (ESG) products while marketing itself as a leader in the field.  SEC

September 22, 2023

Goldman Sachs & Co. LLC has agreed to pay $6 million to resolve charges of failing to provide accurate securities trading information to the SEC.  The firm admitted to making 26 of 43 total types of errors, through 22,000 deficient blue sheet submissions, ultimately causing inaccurate or missing trade data for at least 163 million transactions.  SEC

August 29, 2023

Goldman Sachs & Co. has been ordered to pay $5.5 million to settle CFTC charges of violating the cease-and-desist provision of a previous order.  The 2019 order had involved a failure of Goldman’s hardware to record calls to its trading and sales desk for 20 calendar days in 2014.  The present order covers two additional failures involving Goldman’s use of two third-party vendors to record and retain audio calls.  During the early days of the pandemic, increased usage led to increased failures of the vendors’ hardware and software, which in turn led to additional failures to fully record and retain thousands of calls per CFTC recordkeeping requirements.  CFTC

August 28, 2023

Some of the largest credit repair brands in the country, including CreditRepair.com and Lexington Law, have been banned from offering telemarketing credit repair services for 10 years to settle charges of using telemarketers to collect illegal advance fees for their services, in violation of the federal Telemarketing Sale Rule.  The companies have also been ordered to pay $2.7 billion in restitution, and two entities, Progrexion Marketing and Health law firm, will pay $64 million in civil penalties.  CFPB

August 25, 2023

Wells Fargo Clearing Services LLC and Wells Fargo Advisors Financial Network LLC (collectively, Wells Fargo), has agreed to pay $35 million in civil penalties to resolve charges of overcharging more than 10,900 investment advisory accounts more than $26.8 million in excessive advisory fees.  The fees were inadvertently charged to certain clients who opened accounts before 2014 through the end of 2022, after account processing staff failed to enter agreed-upon reduced fees into billing systems.  Wells Fargo has already reimbursed affected accountholders approximately $40 million with interest.  SEC