New York-based broker-dealer Guggenheim Securities has agreed to pay a $208,912 civil penalty for violating whistleblower protection rules, the Securities and Exchange Commission (SEC) announced Wednesday.
Guggenheim’s compliance manual prohibited employees from contacting any regulator, including the SEC, prior to receiving approval from the firm’s compliance department, according to the agency. The SEC’s order cites the following excerpt from the manual under the “Communications with Regulators” section:
Employees are … strictly prohibited from initiating contact with any Regulator without prior approval from the Legal or Compliance Department. This prohibition applies to any subject matter that might be discussed with a Regulator, including an individual’s registration status with FINRA. Any employee that violates this policy may be subject to disciplinary action by the Firm.
The language was included in the manual from at least April 2016 to July 2020, the SEC stated. Employees were required to sign acknowledgement they read the manual on an annual basis. The SEC order also found Guggenheim provided annual compliance training to its employees in 2018 and 2019 that included similar language.
The company’s alleged conduct violated Rule 21F-17 of the Exchange Act, which prohibits any person from taking action to impede an individual from communicating directly with the SEC about a possible securities law violation. The SEC said it is unaware of any instances where a Guggenheim employee was prevented from contacting the regulator.
Guggenheim has since revised its manual by removing the excerpt and adding language affirmatively advising employees of their right to contact regulators with concerns about potential legal or regulatory violations. The SEC noted the company drew attention to the changes through a compliance alert.
Guggenheim agreed, without admitting or denying the SEC’s findings, to a cease-and-desist order and a censure.
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