$81 million in Whistleblower Settlements for Recordkeeping Violations

April 17, 2024
$81 million in Whistleblower Settlements for Recordkeeping Violations

The Securities and Exchange Commission (SEC) recently announced $81 million in settlements stemming from widespread recordkeeping failures among numerous financial firms. The violations, which involved 16 broker-dealers and investment advisers, underscore the critical role of proper recordkeeping in maintaining transparency and regulatory compliance within the financial industry. This 2024 SEC Whistleblower result continues with the hundreds of millions of fines levied against companies that have failed to preserve their communications over the last couple of years.


The SEC’s investigation revealed persistent deficiencies in the maintenance and preservation of electronic communications by the firms involved. Employees were found to have engaged in unapproved off-channel communication methods, including personal text messages discussing business matters. These actions not only violated federal securities laws but also hindered the SEC’s ability to conduct thorough investigations. This failure to keep information is often either expressly endorsed by the company or the company is aware of the back channels and doesn’t shut it down. It often occurs with the use of WhatsApp, WeChat for foreign clients, or Snapchat for more sinister purposes. The SEC wants a complete audit trail so there’s no ambiguity about what was said between the company and the client.

In response to the SEC’s findings, the 16 firms admitted their misconduct and agreed to pay civil penalties totaling $81 million. The breakdown of SEC penalties and potential associated whistleblower awards are as follows:

Northwestern Mutual Investment Services LLC (NMIS), Northwestern Mutual Investment Management Co. LLC (NMIM), and Mason Street Advisors LLC (Mason Street): $16.5 million penalty. Whistleblower award potential: $1.65 million to $4.95 million.

Guggenheim Securities LLC (Guggenheim Securities) and Guggenheim Partners Investment Management LLC (GPIM): $15 million penalty. Whistleblower award potential: $1.5 million to $4.5 million.

Oppenheimer & Co. Inc. (Oppenheimer): $12 million penalty. Whistleblower award potential: $1.2 million to $3.6 million.

Cambridge Investment Research Inc. (CIR) and Cambridge Investment Research Advisors Inc. (CIRA): $10 million penalty. Whistleblower award potential: $1 million to $3 million.

Key Investment Services LLC (KIS) and KeyBanc Capital Markets Inc.: $10 million penalty. Whistleblower award potential: $1 million to $3 million.

Lincoln Financial Advisors Corporation and Lincoln Financial Securities Corporation: $8.5 million penalty. Whistleblower award potential: $850,000 to $2.55 million.

U.S. Bancorp Investments Inc. (U.S. Bancorp): $8 million penalty. Whistleblower award potential: $800,000 to $2.4 million.

The Huntington Investment Company (HIC), Huntington Securities Inc. (HSI), and Capstone Capital Markets LLC (Capstone): $1.25 million penalty. Whistleblower award potential: $125,000 to $375,000.

Additionally, the firms committed to implementing robust compliance policies and procedures to prevent future violations. As part of the settlement, independent compliance consultants will conduct comprehensive reviews to ensure adherence to regulatory standards.

The SEC whistleblower program is a bit labyrinthine, and the SEC will periodically publish the list of covered actions via a notice sometimes referred to as a NOCA, (Notice of Covered Action). The SEC may not even tell the whistleblower their matter was resolved, which puts the whistleblower on the clock to opt in for the SEC whistleblower award. Failure to do so in a timely manner may forfeit the award. These potential missteps are even more reason to hire an experienced SEC whistleblower law firm to ensure that your rights are preserved.

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SEC Whistleblower Award

Whistleblowers play a crucial role in uncovering such misconduct and assisting regulatory agencies in their investigations. Under the SEC whistleblower program, individuals who report violations of federal securities laws may be eligible for monetary awards ranging from 10% to 30% of the collected sanctions, provided the monetary sanctions exceed $1 million.

Whistleblowers who have information regarding recordkeeping violations similar to those outlined in the recent SEC settlement–as well as other SEC violations–are encouraged to come forward and submit tips to the SEC via a TCR form. By doing so, whistleblowers not only help hold violators accountable but also stand to receive substantial awards for their contributions to enforcement efforts. The SEC whistleblower program has provided substantial monetary SEC rewards, but it’s a very well utilized program, so it’s critical to tee up the TCR in the best possible manner. With the use of an SEC whistleblower law firm, you can help your chances in succeeding and potentially stay anonymous from start to finish, even to the SEC!

Impact of the SEC Whistleblower Program

The SEC whistleblower program has a rich history of rewarding individuals who come forward with inside information about securities law violations. Since its inception, the program has bequeathed hundreds of millions of dollars in SEC whistleblower awards, which really provides incentivizes to well-placed insiders to blow the whistle on wrongdoing and bolster enforcement efforts.

One of the most notable awards in SEC whistleblower program history was awarded a couple years ago when an SEC whistleblower received a meaty $114 million SEC whistleblower award—the largest in the program’s history at the time. This landmark award underscored the program’s effectiveness and was broadcast to encourage other insiders to step up to the plate – but not necessarily step up with their name! Some of the biggest SEC whistleblower rewards have gone to people who have stayed anonymous through the use of a securities law firm.

Over the years, the SEC whistleblower program has continued to make headlines with substantial awards, ranging from millions to tens of millions of dollars. These awards not only recognize the courage and integrity of whistleblowers but also serve as powerful deterrents against future misconduct within the financial industry.

In addition to the sizeable awards, the SEC whistleblower program has also played a crucial role in uncovering and prosecuting a wide range of securities violations, including insider trading, accounting fraud, Ponzi schemes and market manipulation. Whistleblowers have provided invaluable assistance to the SEC in investigating complex cases and holding wrongdoers accountable for their actions.

The success of the SEC whistleblower program highlights the importance of incentivizing whistleblowers to come forward and report wrongdoing. By offering monetary rewards and protection against retaliation, the program empowers individuals to speak up without fear of reprisal, ultimately safeguarding investors and preserving the integrity of the securities markets.

Report SEC Fraud

If you have information about recordkeeping violations or other securities law violations, you should speak with a qualified SEC whistleblower attorney. Remember, whistleblowers play a crucial role in maintaining the integrity of the financial markets and promoting investor protection. Your information could make a significant difference and lead to a successful enforcement action, potentially resulting in a substantial award under the SEC whistleblower program and you can go to sleep at night knowing you did the right thing.