PLANADVISER - January/February 2022 - 8

compliance news //
of wrongdoing and deny all liability for
the claims in this action.
The plaintiffs' class had claimed
In the Risk Alert, regulators
that T. Rowe Price violated its fiduciary
duties under ERISA by restricting
access to solely T. Rowe Price funds. In
the complaint, the plaintiffs accused
the plan's trustees of breaching their
fiduciary duties under ERISA by either
failing to remedy their predecessors'
breaches or, in some cases, by offering
expensive retail class versions of
propriety mutual funds and waiting
too long to shift to lower-cost versions
of the funds.
The
defendants
argued
that
plan documents required the plan's
trustees to select an exclusive lineup
of T. Rower Price funds. The plaintiffs
asked an appellate court to consider
whether a document mandating that
T. Rowe Price funds be offered in its
401(k) plan violated ERISA. The interlocutory
appeal on the document issue
was denied.
Importance of Digital
Recordkeeping
This past December,
reminded financial professionals of
their duties under the Advisers Act
Rule 204-2, known as the " Books
and Records Rule. " The alert further
encouraged firms to proactively
consider making
" improvements
... a Risk Alert ...
encouraged
advisers to
" review their risks,
practices, policies
and procedures
regarding
electronic
messaging. "
the Securities
and Exchange Commission (SEC)
announced charges against J.P. Morgan
Securities LLC (JPMS), a broker/dealer
(B/D) subsidiary of JPMorgan Chase &
Co. The charges alleged " widespread
and longstanding failures by the firm
and its employees to maintain and
preserve written communications. "
According to a statement from the
SEC, JPMS admitted the facts set forth
in the agency's order and acknowledged
that its conduct violated federal securities
laws. In turn, the company has
agreed to pay a $125 million penalty
and implement robust improvements
to its compliance policies and procedures
to settle the matter.
Commenting on the charges, SEC
Chair Gary Gensler noted that recordkeeping
and books-and-records obligations
have been an essential part of
market integrity and a foundational
component of the SEC's ability to be
" an effective cop on the beat. "
As described in the SEC's order,
from at
least
JPMS admitted that
January 2018 through November 2020,
its employees often communicated
about
securities
business matters
on their personal devices, using text
messages, WhatsApp and personal
email accounts. According to the SEC,
none of these records were preserved
by the firm as required by federal
securities laws.
JPMS further admitted that supervisors,
including managing directors
and other senior supervisors responsible
for implementing and ensuring
compliance with JPMS's stated policies
and procedures, also used their
personal devices to communicate
about the firm's securities business.
The charges and penalty settlement
come some three years after a Risk
Alert publication issued by the SEC's
Office of Compliance Inspections and
Examinations
encouraged
advisers
to " review their risks, practices, policies
and procedures regarding electronic
messaging. " That guidance, in
turn, followed on the heels of various
advisory firms, broker/dealers (B/Ds)
and other financial services providers
rolling out new text-based communication
solutions to their representatives.
to
their compliance programs that would
help them comply with applicable
regulatory requirements. "
Firms that believe their record preservation
practices fail to comply with
the securities laws are encouraged to
contact the SEC at BDRecordsPreservation@sec.gov.
More
CFP Board Sanctions
Have Been Revealed
In January, the Certified Financial
Planner (CFP) Board of Standards
announced a new set of public sanctions
against 20 current or former CFP
professionals or candidates for CFP
certification. Public sanctions
taken
by the board, in order of increasing
severity, are public censures, suspensions,
temporary bars, permanent bars
and revocations of the right to use the
CFP marks.
Often the public sanctions are the
result of " historical investigations " the
board opened following background
checks conducted on all CFP professionals.
In this round of sanctions,
13 of the actions taken by the board
resulted from historical investigations.
In one case the board found that a
financial services professional prioritized
paying for college tuition and
expenses over paying taxes to the IRS
for six years, resulting in that agency
filing federal tax liens against the
adviser totaling almost $230,000.
Currently, the adviser is making
payments to the IRS pursuant to an
installment agreement, but the CFP
Board determined that the adviser's
conduct violated Rule 6.5 of the board's
Rules of Conduct. Specifically, this rule
provides that a certificate holder shall
not engage in conduct that reflects
adversely on his integrity or fitness
as a certificate holder, upon the CFP
marks or upon the profession.
Accordingly, the CFP Board determined
to issue the individual an order
of public censure. -PA
8 | planadviser.com January-February 2022
http://www.planadviser.com
PLANADVISER - January/February 2022

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