July 4, 2021

SEC settles with broker-dealer over allegations that it violated the whistleblower protection rule

On June 23, 2021, Guggenheim Securities, LLC (Guggenheim) entered into an administrative resolution with the US Securities and Exchange Commission (SEC) to resolve allegations that the New York-based broker-dealer violated the whistleblower protection provisions of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) by inserting language into its Core Compliance Manual (Manual) that hindered employees’ ability to communicate directly with the SEC to report possible securities law violations.  
According to the SEC’s order, between 2016 and 2020 Guggenheim annually provided the Manual to employees and required that employees sign an acknowledgement (upon hire and annually thereafter) that they had received, read, and would adhere to the Manual.  During this time period, the Manual contained a provision stating that Guggenheim employees were “strictly prohibited from initiating contact with any Regulator without prior approval from the Legal or Compliance Department,” and threatening that “[a]ny employee that violates this policy may be subject to disciplinary action by the Firm.”  The Manual defined “Regulator” as “including but not limited to a representative from the SEC, FINRA, the respective State Securities Commissions, etc.”  In 2018 and 2019, Guggenheim also provided its employees with compliance training that included a slide reiterating this non-disclosure policy.
As a result of this non-disclosure policy, the SEC found that Guggenheim willfully violated the whistleblower protection provisions of Dodd-Frank.  Without admitting or denying the findings, Guggenheim agreed to pay a civil penalty of $208,912 and cease and desist from committing any further violations.  The SEC’s order states that, in determining to accept this resolution, it took into account that Guggenheim had remediated—upon being contacted by the SEC—by promptly revising the Manual to remove the non-disclosure language and to add language affirmatively advising employees of their right to contact regulators regarding potential legal or regulatory violations.  These revisions were promptly shared with Guggenheim employees via a compliance alert.

SEC Press Release | SEC Order