A U.S. brokerage firm and a couple of affiliated advisory firms have been sanctioned for signing confidentiality agreements with clients, which allegedly impeded their contact with regulators.
On Wednesday, the U.S. Securities and Exchange Commission (SEC) announced settled charges against a New Jersey-based broker-dealer, Nationwide Planning Associates, Inc., and a pair of related investment advisors — NPA Asset Management, LLC and Blue Point Strategic Wealth Management, LLC. The regulator said the firms signed confidentiality deals with clients, which allegedly limited the clients’ ability to report any suspected regulatory violations.
According to the SEC’s order, the firms asked retail investors that were being compensated for losses caused by alleged misconduct to sign confidentiality agreements that restricted them from contacting the regulator to report alleged violations.
Under the agreements, the clients could allegedly only communicate with the SEC when the regulator initiated the contact.
The SEC said these provisions violated whistleblower protections.
“Pure and simple, investors need to be able to report complaints or evidence of wrongdoing to the SEC without impediment,” said Corey Schuster, co-chief of the SEC enforcement division’s asset management unit, in a release issued Wednesday.
“We will continue to hold firms accountable for putting roadblocks between us and their investors.”
The firms agreed to settle the allegations, without admitting or denying the SEC’s findings.
In total, they paid US$240,000 to settle the allegations. They also agreed to be censured, and to cease and desist from violating the whistleblower protection rule.
The SEC’s order said the firms have stopped using the provisions in their agreements with clients, and they informed affected clients that they are not prohibited from contacting regulators.
“The commission determined that a penalty of US$240,000 is appropriate in light of respondents’ co-operation and remedial acts and has taken the respondents’ relative size and financial condition into consideration in apportioning the penalty,” the order said.