SEC Charges Broker-Dealer for Failures Related to Filing Suspicious Activity Reports
On May 12, 2021, the Securities and Exchange Commission (the “SEC”) announced settled charges against GWFS Equities Inc. (GWFS), a Colorado-based registered broker-dealer and affiliate of Great-West Life & Annuity Insurance Company, for violating the federal securities laws governing the filing of Suspicious Activity Reports (SARs).
GWFS provides services to employer-sponsored retirement plans.
According to the SEC’s order, from September 2015 through October 2018, GWFS was aware of increasing attempts by external bad actors to gain access to the retirement accounts of individual plan participants. The order further finds that GWFS was aware that the bad actors attempted or gained access by, among other things, using improperly obtained personal identifying information of the plan participants, and that the bad actors frequently were in possession of electronic login information such as user names, email addresses, and passwords.
Broker-dealers are required to file SARs for certain transactions suspected to involve fraudulent activity or a lack of an apparent business purpose. The guidance for preparing SARs from the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) states that in order to be effective tools for law enforcement and fulfill their intended purpose, SAR narratives should include “the five essential elements of information – who? what? when? where? and why? – of the suspicious activity being reported.”
The order finds that GWFS failed to file approximately 130 SARs, including in cases when it had detected external bad actors gaining, or attempting to gain, access to the retirement accounts of participants in the employer-sponsored retirement plans it serviced. Further, for nearly 300 SARs that GWFS did file, the order finds that GWFS did not include the “five essential elements” of information it knew and was required to report about the suspicious activity and suspicious actors, including cyber-related data such as URL addresses and IP addresses.
The SEC’s order finds that GWFS violated Section 17(a) of the Securities Exchange Act and Rule 17a-8 thereunder. Without admitting or denying the SEC’s findings, GWFS agreed to a settlement that imposes a $1.5 million penalty, a censure, and an order to cease and desist from future violations.
For further information about this securities law blog post, please contact Brenda Hamilton, Securities Attorney at 101 Plaza Real S, Suite 202 N, Boca Raton, Florida, (561) 416-8956, by email at [email protected] or visit www.securitieslawyer101.com. This securities law blog post is provided as a general informational service to clients and friends of Hamilton & Associates Law Group and should not be construed as, and does not constitute legal advice on any specific matter, nor does this message create an attorney-client relationship. Please note that the prior results discussed herein do not guarantee similar outcomes.
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Brenda Hamilton, Securities Attorney
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