On September 4, 2024, the Securities and Exchange Commission announced that it had reached a settlement with broker-dealer Nationwide Planning Associates, Inc. and affiliated investment advisers NPA Asset Management, LLC and Blue Point Strategic Wealth Management, LLC (the “Respondents”) to resolve allegations that they violated the Dodd-Frank Act whistleblower protection rule. The Respondents agreed to pay a combined $240,000 in civil penalties for allegedly impeding brokerage customers and advisory clients from reporting potential securities law violations to the SEC or another federal, state, or self-regulatory securities authority.
According to the SEC’s order, from May 2021 through February 2024, the Respondents asked eleven clients to sign confidentially agreements (the “Agreements”) related to payments intended to compensate the clients for investment account losses allegedly caused by the Respondents’ breaches of federal or state securities laws. The SEC stated that the agreements contained clauses that permitted clients to disclose information to the SEC or another regulator only if that authority initiated the inquiry. In some instances, the clients were also allegedly required to represent that they had not disclosed, and would forever refrain from disclosing, any details of the underlying dispute to the SEC or another regulator.
The SEC found that these clauses violated the whistleblower protections in Rule 21F-17(a) of the Securities Exchange Act of 1934, which prohibit actions that impede individuals from communicating directly with the SEC about possible securities law violations. Without admitting or denying the SEC’s findings, Nationwide, NPA, and Blue Point consented to the entry of the order against them and agreed to cease-and-desist from further securities violations. The SEC apportioned the $240,000 penalty based on the size and financial condition of each entity, resulting in NPA paying $160,000, Nationwide paying $70,000, and Blue Point paying $10,000.
The SEC said that these penalties were imposed after considering Respondents’ cooperation and remedial actions, including their willingness to stop using the Agreement and accompanying documents after learning of the violation of Rule 21F-17. The SEC also credited Respondents’ efforts to reach out to the clients that received the Agreements to ensure that they were aware that they were not prohibited from communicating with any government authority regarding their accounts, the Agreements, or the underlying facts and circumstances from which the Agreements arose.