In re Qatalyst Partners LP

 
 
 
UNITED STATES OF AMERICA 
 Before the 
 SECURITIES AND EXCHANGE COMMISSION 
 
SECURITIES EXCHANGE ACT OF 1934 
Release No. 101143 / September 24, 2024 
 
ADMINISTRATIVE PROCEEDING 
File No. 3-22167 
 
 
In the Matter of 
 
Qatalyst Partners LP,  
 
Respondent. 
ORDER INSTITUTING 
ADMINISTRATIVE AND CEASE-AND-
DESIST PROCEEDINGS, PURSUANT TO 
SECTIONS 15(b) AND 21C OF THE 
SECURITIES EXCHANGE ACT OF 1934, 
MAKING FINDINGS, AND IMPOSING 
REMEDIAL SANCTIONS AND A CEASE-
AND-DESIST ORDER 
 
I. 
 The Securities and Exchange Commission (“Commission”) deems it appropriate and in 
the public interest that public administrative and cease-and-desist proceedings be, and hereby 
are, instituted pursuant to Sections 15(b) and 21C of the Securities Exchange Act of 1934 
(“Exchange Act”) against Qatalyst Partners LP (“Respondent” or “Qatalyst”). 
 
II. 
 In anticipation of the institution of these proceedings, Respondent has submitted an Offer 
of Settlement (“Offer”) that the Commission has determined to accept. Respondent admits the facts 
set forth in Section III below, acknowledges that its conduct violated the federal securities laws, 
admits the Commission’s jurisdiction over it and the subject matter of these proceedings, and 
consents to the entry of this Order Instituting Administrative and Cease-and-Desist Proceedings, 
Pursuant to Sections 15(b) and 21C of the Securities Exchange Act of 1934, Making Findings, 
and Imposing Remedial Sanctions and a Cease-and-Desist Order (“Order”), as set forth below.  
 
  

 
2 
 
III. 
 On the basis of this Order and Respondent’s Offer, the Commission finds
1
 that: 
 
Summary 
1. The federal securities laws impose recordkeeping requirements on broker-dealers 
to ensure that they responsibly discharge their crucial role in our markets. The Commission has 
long said that compliance with these requirements is essential to investor protection and the 
Commission’s efforts to further its mandate of protecting investors, maintaining fair, orderly, and 
efficient markets, and facilitating capital formation. 
2. These proceedings arise out of Qatalyst’s identification—and self-report—of 
failures by Qatalyst personnel to adhere to certain of these essential recordkeeping requirements 
and Qatalyst’s own policies and procedures. Using their personal devices, these personnel 
communicated both internally and externally by personal text messages and/or other unapproved 
written communications platforms (“off-channel communications”).  
3. In response to the Commission’s recent off-channel enforcement actions, Qatalyst 
conducted an internal investigation, disciplined the relevant personnel, and self-reported the 
findings of its investigation to the Commission staff. It proactively identified key documents and 
facts, which assisted the Commission staff in efficiently investigating the conduct.  
4. The investigation showed that from at least 2021 (the “Relevant Period”), a small 
number of Qatalyst personnel sent and received off-channel communications that related to its 
broker-dealer business. Qatalyst did not maintain or preserve these written communications. 
Qatalyst’s failure involved personnel at various levels of authority. As a result, Qatalyst violated 
Section 17(a) of the Exchange Act and Rule 17a-4(b)(4) thereunder. 
5. Qatalyst’s failure to implement a system reasonably expected to determine 
whether all personnel were following its policies and procedures that prohibit such 
communications led to its failure to reasonably supervise its personnel within the meaning of 
Section 15(b)(4)(E) of the Exchange Act.   
6. As described below, prior to self-reporting its recordkeeping violations, Qatalyst 
had in place recordkeeping practices, policies and procedures designed to, among other things, 
prevent and detect recordkeeping violations and took disciplinary action against those who 
violated the policies. After its self-report, it took steps to remediate the violations, including 
implementing further technology solutions for personnel, and cooperated with the Commission’s 
investigation. Because of Qatalyst’s self-policing, self-report, prompt remediation, and 
cooperation, the Commission will not impose a civil penalty. 
 
1
  The findings herein are made pursuant to Respondent’s Offer of Settlement and are not 
binding on any other person or entity in this or any other proceeding.  

 
3 
 
Respondent 
7. Qatalyst is a Delaware limited partnership with its principal office in San 
Francisco, California and has been registered with the Commission as a broker-dealer since 2008.  
Recordkeeping Requirements Under the Exchange Act 
8. Section 17(a)(1) of the Exchange Act authorizes the Commission to issue rules 
requiring broker-dealers to make and keep for prescribed periods, and furnish copies of, such 
records as necessary or appropriate in the public interest, for the protection of investors or 
otherwise in furtherance of the purposes of the Exchange Act. 
9. The Commission adopted Rule 17a-4 under the Exchange Act pursuant to this 
authority. Rule 17a-4 specifies the manner and length of time that the records made in 
accordance with Commission rules, and certain other records made by broker-dealers, must be 
maintained and produced promptly to Commission representatives.  
10. The rules adopted under Section 17(a)(1) of the Exchange Act, including Rule 
17a-4(b)(4), require that broker-dealers preserve for at least three years, the first two years in an 
easily accessible place, originals of all communications received and copies of all 
communications sent relating to the broker-dealer’s business as such. These rules impose 
minimum recordkeeping requirements that are based on standards a prudent broker-dealer should 
follow in the normal course of business.  
11. The Commission previously has stated that these and other recordkeeping 
requirements “are an integral part of the investor protection function of the Commission, and 
other securities regulators, in that the preserved records are the primary means of monitoring 
compliance with applicable securities laws, including antifraud provisions and financial 
responsibility standards.” Commission Guidance to Broker-Dealers on the Use of Electronic 
Storage Media under the Electronic Signatures in Global and National Commerce Act of 2000 
with Respect to Rule 17a-4(f), 17 C.F.R. Part 241, Exchange Act Rel. No. 44238 (May 1, 2001). 
Qatalyst’s Policies and Procedures 
12. Qatalyst maintained certain policies and procedures designed to ensure the 
retention of business-related records, including electronic communications, in compliance with 
the relevant recordkeeping provisions.  
13. As early as 2008, Qatalyst personnel were advised that the use of unapproved 
electronic communications methods, including on their personal devices, was not permitted, and 
they should not use personal email, chats or text messaging applications for business purposes, or 
forward work-related communications to unapproved applications on their personal devices. 
Qatalyst reinforced its policies at least annually with regular, mandatory training and 
reinforcement from compliance and senior management. Qatalyst personnel were specifically 
advised not to list personal phone numbers in email signatures. 
14. In addition, beginning in March 2017, Qatalyst provided its personnel with a 
compliant text-messaging process that could retain business communications. Qatalyst instructed 

 
4 
 
its personnel to use only this process to communicate about Qatalyst’s broker-dealer business by 
text message.  
15. Over time, Qatalyst updated its policies and procedures to allow for additional 
messaging applications to be used in its broker-dealer business. Beginning in 2020, Qatalyst 
required all personnel to have a firm-issued device on which to conduct Qatalyst business, and 
encouraged personnel to use firm-issued devices when communicating with both business and 
personal contacts. These phones were configured to retain communications with business contacts 
but allow personnel to separate communications with personal contacts, which were either not 
retained or retained and not reviewed. Alternatively, the firm’s policies allowed personnel to 
maintain both a Qatalyst-owned and a separate personal phone—but made clear that 
communicating with business contacts on this personal device could subject personnel to censure, 
fines, or termination.  
16. In 2020 and 2022, Qatalyst implemented additional policies and procedures to 
retain Slack and LinkedIn communications, respectively.  
17. If firm personnel received communications through an unapproved platform, 
Qatalyst policies required retaining these communications. Qatalyst policies required that the 
communications promptly be forwarded to Qatalyst. Policies and reminders explained to personnel 
that this process was not a substitute for using on-channel communications, and prohibited 
personnel from responding substantively to, or initiating a substantive business conversation with, 
a firm customer.  
18. Messages sent through firm-approved communications methods were monitored, 
subject to review, and archived. Qatalyst’s compliance staff reviewed a random sample of 
incoming and outgoing messages on all monitored platforms. Messages sent through unapproved 
communications methods, such as WhatsApp and WeChat on personal devices, were not 
monitored, subject to review or archived. 
19. Qatalyst conducted trainings for its personnel, which were designed to address the 
firm’s supervision of its personnel and adherence to Qatalyst’s books and recordkeeping 
requirements. Supervisory policies notified personnel that electronic communications were 
subject to surveillance by Qatalyst. Starting in 2017, Qatalyst implemented a compliant text-
messaging process that allowed personnel to text and retained these communications.  
20. Qatalyst had procedures for all personnel, including supervisors, requiring annual 
self-attestations of compliance. Personnel who received discipline for off-channel 
communications, as described below, were required to provide additional attestations of 
compliance. 
21. Qatalyst has also encouraged adherence to its policies by disciplining firm 
personnel for failure to retain off-channel communications. Over the last decade, it issued censure 
letters and fines to at least 17 personnel at all levels of seniority for violations of its policies, both 
for sending off-channel communications or for failing to timely forward off-channel 
communications received from outside the firm.  

 
5 
 
22. Qatalyst, however, failed to implement a system reasonably expected to determine 
whether all personnel, including supervisors, were following Qatalyst’s policies and procedures. 
While permitting personnel to use approved communications methods, including on personal 
phones, for business communications, Qatalyst failed to implement sufficient monitoring to 
ensure that its recordkeeping and communications policies and procedures were always being 
followed.  
Qatalyst’s Broker-Dealer Business Recordkeeping Failures  
23. In September 2021, the Commission staff commenced a risk-based initiative to 
investigate whether broker-dealers were properly retaining business-related messages sent and 
received on personal devices. In March 2024, Qatalyst voluntarily contacted the staff regarding 
certain off-channel communications activity that it had identified related to its broker-dealer 
business. As reported to the Commission staff, Qatalyst personnel who had engaged in the use of 
off-channel communications included senior leadership. 
24. Qatalyst collected data from a sampling of broker-dealer personnel and found that 
during the Relevant Period, several broker-dealer personnel, including at senior levels, had 
engaged in off-channel communications that concerned the broker-dealer’s business as such. 
These personnel sent and received a number off-channel communications involving other 
Qatalyst personnel and Qatalyst’s brokerage customers or other participants in the securities 
industry.  
Qatalyst’s Violations and Failure to Supervise 
25. As a result of the conduct described above, Respondent willfully
2
 violated Section 
17(a) of the Exchange Act and Rule 17a-4(b)(4) thereunder. 
26. As a result of the conduct described above, Respondent failed reasonably to 
supervise its personnel with a view to preventing or detecting certain of its personnel’s aiding 
and abetting violations of Section 17(a) of the Exchange Act and Rule 17a-4(b)(4) thereunder, 
within the meaning of Section 15(b)(4)(E) of the Exchange Act.  
Qatalyst’s Self-Reporting, Cooperation, Remedial Efforts, and Self-Policing  
27. In determining to accept the Offer, the Commission considered Qatalyst’s self-
reporting of its violations to the Commission’s staff. In March 2024, Qatalyst self-reported to the 
Commission staff that several employees had texted about the business of the broker-dealer, in 
violation of the firm’s policies and procedures and its recordkeeping requirements. The 
Commission also considered Qatalyst’s cooperation with the staff’s investigation. For example, 
Qatalyst cooperated with the staff’s investigation by proactively gathering communications from 
the personal devices of its personnel, presenting evidence of findings, including violative off-
 
2
  “Willfully,” for purposes of imposing relief under Section 15(b) of the Exchange Act, 
“‘means no more than that the person charged with the duty knows what he is doing.’”  
Wonsover v. SEC, 205 F.3d 408, 414 (D.C. Cir 2000) (quoting Hughes v. SEC, 174 F.2d 969, 
977 (D.C. Cir. 1949)).  

 
6 
 
channel communications, and detailing the firm’s past efforts at compliance and disciplinary 
actions, all within several months.  
28. The Commission also considered Qatalyst’s self-policing prior to its discovery of 
the misconduct, including its adoption and implementation of policies and procedures designed 
to prevent and detect any violations of the federal securities laws regarding recordkeeping 
requirements. Since 2015, Qatalyst has required personnel to forward any off-channel 
communications to the firm promptly for Qatalyst’s retention and has sanctioned personnel for 
delays in doing so. The communications identified as part of the Commission’s investigation 
appeared to demonstrate substantial compliance with this policy. Since 2017, Qatalyst has 
provided personnel with a compliant text-messaging process that allows its personnel to send 
SMS communications that the Firm retains. Qatalyst repeatedly reiterated its communications 
policies through compliance reminders and a disciplinary framework for violations. Between 
2012 and 2023, Qatalyst censured, fined, and retrained through attestations at least 17 personnel 
at all levels of seniority who had not complied with electronic communications policies. 
29. The Commission also considered Qatalyst’s prompt remediation after its discovery 
of the violations at issue, including discipline of the personnel whose recordkeeping violations 
Qatalyst identified during its investigation, strengthening its self-policing procedures by making 
investments in new technologies to improve surveillance efforts, and conducting trainings and 
sending firm-wide reminders that emphasized the importance of complying with recordkeeping 
obligations. Qatalyst also took proactive remedial steps to onboard and preserve off-channel 
communications. 
IV. 
 In view of the foregoing, the Commission deems it appropriate and in the public interest 
to impose the sanctions agreed to in Respondent’s Offer. 
 
 Accordingly, pursuant to Sections 15(b) and 21C of the Exchange Act, it is hereby 
ORDERED that: 
 
 A. Respondent shall cease and desist from committing or causing any violations and 
any future violations of Section 17(a) of the Exchange Act and Rule 17a-4 thereunder. 
 
B. Respondent is censured.  
 
C. Respondent acknowledges that the Commission is not imposing a civil penalty  
based upon Respondent’s self-policing, self-report, prompt remediation, and cooperation in a 
Commission investigation. If at any time following the entry of the Order, the Division of 
Enforcement (“Division”) obtains information indicating that Respondent knowingly provided 
materially false or misleading information or materials to the Commission, or in a related  
  

 
7 
 
proceeding, the Division may, at its sole discretion and with prior notice to the Respondent, 
petition the Commission to reopen this matter and seek an order directing that the Respondent pay 
a civil money penalty. Respondent may contest by way of defense in any resulting administrative 
proceeding whether it knowingly provided materially false or misleading information, but may not: 
(1) contest the findings in the Order; or (2) assert any defense to liability or remedy, including, but 
not limited to, any statute of limitations defense. 
 
 By the Commission. 
 
 
 
Vanessa A. Countryman 
       Secretary 

UNITED STATES OF AMERICA 

 Before the 

 SECURITIES AND EXCHANGE COMMISSION 

 

SECURITIES EXCHANGE ACT OF 1934 

Release No. 101143 / September 24, 2024 

 

ADMINISTRATIVE PROCEEDING 

File No. 3-22167 

 

 

In the Matter of 

 

Qatalyst Partners LP,  

 

Respondent. 

ORDER INSTITUTING 

ADMINISTRATIVE AND CEASE-AND-

DESIST PROCEEDINGS, PURSUANT TO 

SECTIONS 15(b) AND 21C OF THE 

SECURITIES EXCHANGE ACT OF 1934, 

MAKING FINDINGS, AND IMPOSING 

REMEDIAL SANCTIONS AND A CEASE-

AND-DESIST ORDER 

 

I. 

 The Securities and Exchange Commission (“Commission”) deems it appropriate and in 

the public interest that public administrative and cease-and-desist proceedings be, and hereby 

are, instituted pursuant to Sections 15(b) and 21C of the Securities Exchange Act of 1934 

(“Exchange Act”) against Qatalyst Partners LP (“Respondent” or “Qatalyst”). 

 

II. 

 In anticipation of the institution of these proceedings, Respondent has submitted an Offer 

of Settlement (“Offer”) that the Commission has determined to accept. Respondent admits the facts 

set forth in Section III below, acknowledges that its conduct violated the federal securities laws, 

admits the Commission’s jurisdiction over it and the subject matter of these proceedings, and 

consents to the entry of this Order Instituting Administrative and Cease-and-Desist Proceedings, 

Pursuant to Sections 15(b) and 21C of the Securities Exchange Act of 1934, Making Findings, 

and Imposing Remedial Sanctions and a Cease-and-Desist Order (“Order”), as set forth below.  

 

  



 

2 

 

III. 

 On the basis of this Order and Respondent’s Offer, the Commission finds1 that: 

 

Summary 

1. The federal securities laws impose recordkeeping requirements on broker-dealers 

to ensure that they responsibly discharge their crucial role in our markets. The Commission has 

long said that compliance with these requirements is essential to investor protection and the 

Commission’s efforts to further its mandate of protecting investors, maintaining fair, orderly, and 

efficient markets, and facilitating capital formation. 

2. These proceedings arise out of Qatalyst’s identification—and self-report—of 

failures by Qatalyst personnel to adhere to certain of these essential recordkeeping requirements 

and Qatalyst’s own policies and procedures. Using their personal devices, these personnel 

communicated both internally and externally by personal text messages and/or other unapproved 

written communications platforms (“off-channel communications”).  

3. In response to the Commission’s recent off-channel enforcement actions, Qatalyst 

conducted an internal investigation, disciplined the relevant personnel, and self-reported the 

findings of its investigation to the Commission staff. It proactively identified key documents and 

facts, which assisted the Commission staff in efficiently investigating the conduct.  

4. The investigation showed that from at least 2021 (the “Relevant Period”), a small 

number of Qatalyst personnel sent and received off-channel communications that related to its 

broker-dealer business. Qatalyst did not maintain or preserve these written communications. 

Qatalyst’s failure involved personnel at various levels of authority. As a result, Qatalyst violated 

Section 17(a) of the Exchange Act and Rule 17a-4(b)(4) thereunder. 

5. Qatalyst’s failure to implement a system reasonably expected to determine 

whether all personnel were following its policies and procedures that prohibit such 

communications led to its failure to reasonably supervise its personnel within the meaning of 

Section 15(b)(4)(E) of the Exchange Act.   

6. As described below, prior to self-reporting its recordkeeping violations, Qatalyst 

had in place recordkeeping practices, policies and procedures designed to, among other things, 

prevent and detect recordkeeping violations and took disciplinary action against those who 

violated the policies. After its self-report, it took steps to remediate the violations, including 

implementing further technology solutions for personnel, and cooperated with the Commission’s 

investigation. Because of Qatalyst’s self-policing, self-report, prompt remediation, and 

cooperation, the Commission will not impose a civil penalty. 

 
1  The findings herein are made pursuant to Respondent’s Offer of Settlement and are not 

binding on any other person or entity in this or any other proceeding.  



 

3 

 

Respondent 

7. Qatalyst is a Delaware limited partnership with its principal office in San 

Francisco, California and has been registered with the Commission as a broker-dealer since 2008.  

Recordkeeping Requirements Under the Exchange Act 

8. Section 17(a)(1) of the Exchange Act authorizes the Commission to issue rules 

requiring broker-dealers to make and keep for prescribed periods, and furnish copies of, such 

records as necessary or appropriate in the public interest, for the protection of investors or 

otherwise in furtherance of the purposes of the Exchange Act. 

9. The Commission adopted Rule 17a-4 under the Exchange Act pursuant to this 

authority. Rule 17a-4 specifies the manner and length of time that the records made in 

accordance with Commission rules, and certain other records made by broker-dealers, must be 

maintained and produced promptly to Commission representatives.  

10. The rules adopted under Section 17(a)(1) of the Exchange Act, including Rule 

17a-4(b)(4), require that broker-dealers preserve for at least three years, the first two years in an 

easily accessible place, originals of all communications received and copies of all 

communications sent relating to the broker-dealer’s business as such. These rules impose 

minimum recordkeeping requirements that are based on standards a prudent broker-dealer should 

follow in the normal course of business.  

11. The Commission previously has stated that these and other recordkeeping 

requirements “are an integral part of the investor protection function of the Commission, and 

other securities regulators, in that the preserved records are the primary means of monitoring 

compliance with applicable securities laws, including antifraud provisions and financial 

responsibility standards.” Commission Guidance to Broker-Dealers on the Use of Electronic 

Storage Media under the Electronic Signatures in Global and National Commerce Act of 2000 

with Respect to Rule 17a-4(f), 17 C.F.R. Part 241, Exchange Act Rel. No. 44238 (May 1, 2001). 

Qatalyst’s Policies and Procedures 

12. Qatalyst maintained certain policies and procedures designed to ensure the 

retention of business-related records, including electronic communications, in compliance with 

the relevant recordkeeping provisions.  

13. As early as 2008, Qatalyst personnel were advised that the use of unapproved 

electronic communications methods, including on their personal devices, was not permitted, and 

they should not use personal email, chats or text messaging applications for business purposes, or 

forward work-related communications to unapproved applications on their personal devices. 

Qatalyst reinforced its policies at least annually with regular, mandatory training and 

reinforcement from compliance and senior management. Qatalyst personnel were specifically 

advised not to list personal phone numbers in email signatures. 

14. In addition, beginning in March 2017, Qatalyst provided its personnel with a 

compliant text-messaging process that could retain business communications. Qatalyst instructed 



 

4 

 

its personnel to use only this process to communicate about Qatalyst’s broker-dealer business by 

text message.  

15. Over time, Qatalyst updated its policies and procedures to allow for additional 

messaging applications to be used in its broker-dealer business. Beginning in 2020, Qatalyst 

required all personnel to have a firm-issued device on which to conduct Qatalyst business, and 

encouraged personnel to use firm-issued devices when communicating with both business and 

personal contacts. These phones were configured to retain communications with business contacts 

but allow personnel to separate communications with personal contacts, which were either not 

retained or retained and not reviewed. Alternatively, the firm’s policies allowed personnel to 

maintain both a Qatalyst-owned and a separate personal phone—but made clear that 

communicating with business contacts on this personal device could subject personnel to censure, 

fines, or termination.  

16. In 2020 and 2022, Qatalyst implemented additional policies and procedures to 

retain Slack and LinkedIn communications, respectively.  

17. If firm personnel received communications through an unapproved platform, 

Qatalyst policies required retaining these communications. Qatalyst policies required that the 

communications promptly be forwarded to Qatalyst. Policies and reminders explained to personnel 

that this process was not a substitute for using on-channel communications, and prohibited 

personnel from responding substantively to, or initiating a substantive business conversation with, 

a firm customer.  

18. Messages sent through firm-approved communications methods were monitored, 

subject to review, and archived. Qatalyst’s compliance staff reviewed a random sample of 

incoming and outgoing messages on all monitored platforms. Messages sent through unapproved 

communications methods, such as WhatsApp and WeChat on personal devices, were not 

monitored, subject to review or archived. 

19. Qatalyst conducted trainings for its personnel, which were designed to address the 

firm’s supervision of its personnel and adherence to Qatalyst’s books and recordkeeping 

requirements. Supervisory policies notified personnel that electronic communications were 

subject to surveillance by Qatalyst. Starting in 2017, Qatalyst implemented a compliant text-

messaging process that allowed personnel to text and retained these communications.  

20. Qatalyst had procedures for all personnel, including supervisors, requiring annual 

self-attestations of compliance. Personnel who received discipline for off-channel 

communications, as described below, were required to provide additional attestations of 

compliance. 

21. Qatalyst has also encouraged adherence to its policies by disciplining firm 

personnel for failure to retain off-channel communications. Over the last decade, it issued censure 

letters and fines to at least 17 personnel at all levels of seniority for violations of its policies, both 

for sending off-channel communications or for failing to timely forward off-channel 

communications received from outside the firm.  



 

5 

 

22. Qatalyst, however, failed to implement a system reasonably expected to determine 

whether all personnel, including supervisors, were following Qatalyst’s policies and procedures. 

While permitting personnel to use approved communications methods, including on personal 

phones, for business communications, Qatalyst failed to implement sufficient monitoring to 

ensure that its recordkeeping and communications policies and procedures were always being 

followed.  

Qatalyst’s Broker-Dealer Business Recordkeeping Failures  

23. In September 2021, the Commission staff commenced a risk-based initiative to 

investigate whether broker-dealers were properly retaining business-related messages sent and 

received on personal devices. In March 2024, Qatalyst voluntarily contacted the staff regarding 

certain off-channel communications activity that it had identified related to its broker-dealer 

business. As reported to the Commission staff, Qatalyst personnel who had engaged in the use of 

off-channel communications included senior leadership. 

24. Qatalyst collected data from a sampling of broker-dealer personnel and found that 

during the Relevant Period, several broker-dealer personnel, including at senior levels, had 

engaged in off-channel communications that concerned the broker-dealer’s business as such. 

These personnel sent and received a number off-channel communications involving other 

Qatalyst personnel and Qatalyst’s brokerage customers or other participants in the securities 

industry.  

Qatalyst’s Violations and Failure to Supervise 

25. As a result of the conduct described above, Respondent willfully2 violated Section 

17(a) of the Exchange Act and Rule 17a-4(b)(4) thereunder. 

26. As a result of the conduct described above, Respondent failed reasonably to 

supervise its personnel with a view to preventing or detecting certain of its personnel’s aiding 

and abetting violations of Section 17(a) of the Exchange Act and Rule 17a-4(b)(4) thereunder, 

within the meaning of Section 15(b)(4)(E) of the Exchange Act.  

Qatalyst’s Self-Reporting, Cooperation, Remedial Efforts, and Self-Policing  

27. In determining to accept the Offer, the Commission considered Qatalyst’s self-

reporting of its violations to the Commission’s staff. In March 2024, Qatalyst self-reported to the 

Commission staff that several employees had texted about the business of the broker-dealer, in 

violation of the firm’s policies and procedures and its recordkeeping requirements. The 

Commission also considered Qatalyst’s cooperation with the staff’s investigation. For example, 

Qatalyst cooperated with the staff’s investigation by proactively gathering communications from 

the personal devices of its personnel, presenting evidence of findings, including violative off-

 
2  “Willfully,” for purposes of imposing relief under Section 15(b) of the Exchange Act, 

“‘means no more than that the person charged with the duty knows what he is doing.’”  

Wonsover v. SEC, 205 F.3d 408, 414 (D.C. Cir 2000) (quoting Hughes v. SEC, 174 F.2d 969, 

977 (D.C. Cir. 1949)).  



 

6 

 

channel communications, and detailing the firm’s past efforts at compliance and disciplinary 

actions, all within several months.  

28. The Commission also considered Qatalyst’s self-policing prior to its discovery of 

the misconduct, including its adoption and implementation of policies and procedures designed 

to prevent and detect any violations of the federal securities laws regarding recordkeeping 

requirements. Since 2015, Qatalyst has required personnel to forward any off-channel 

communications to the firm promptly for Qatalyst’s retention and has sanctioned personnel for 

delays in doing so. The communications identified as part of the Commission’s investigation 

appeared to demonstrate substantial compliance with this policy. Since 2017, Qatalyst has 

provided personnel with a compliant text-messaging process that allows its personnel to send 

SMS communications that the Firm retains. Qatalyst repeatedly reiterated its communications 

policies through compliance reminders and a disciplinary framework for violations. Between 

2012 and 2023, Qatalyst censured, fined, and retrained through attestations at least 17 personnel 

at all levels of seniority who had not complied with electronic communications policies. 

29. The Commission also considered Qatalyst’s prompt remediation after its discovery 

of the violations at issue, including discipline of the personnel whose recordkeeping violations 

Qatalyst identified during its investigation, strengthening its self-policing procedures by making 

investments in new technologies to improve surveillance efforts, and conducting trainings and 

sending firm-wide reminders that emphasized the importance of complying with recordkeeping 

obligations. Qatalyst also took proactive remedial steps to onboard and preserve off-channel 

communications. 

IV. 

 In view of the foregoing, the Commission deems it appropriate and in the public interest 

to impose the sanctions agreed to in Respondent’s Offer. 

 

 Accordingly, pursuant to Sections 15(b) and 21C of the Exchange Act, it is hereby 

ORDERED that: 

 

 A. Respondent shall cease and desist from committing or causing any violations and 

any future violations of Section 17(a) of the Exchange Act and Rule 17a-4 thereunder. 

 

B. Respondent is censured.  

 

C. Respondent acknowledges that the Commission is not imposing a civil penalty  

based upon Respondent’s self-policing, self-report, prompt remediation, and cooperation in a 

Commission investigation. If at any time following the entry of the Order, the Division of 

Enforcement (“Division”) obtains information indicating that Respondent knowingly provided 

materially false or misleading information or materials to the Commission, or in a related  

  



 

7 

 

proceeding, the Division may, at its sole discretion and with prior notice to the Respondent, 

petition the Commission to reopen this matter and seek an order directing that the Respondent pay 

a civil money penalty. Respondent may contest by way of defense in any resulting administrative 

proceeding whether it knowingly provided materially false or misleading information, but may not: 

(1) contest the findings in the Order; or (2) assert any defense to liability or remedy, including, but 

not limited to, any statute of limitations defense. 

 

 By the Commission. 

 

 

 

Vanessa A. Countryman 

       Secretary