In re Cetera Advisor Networks LLC

 
 
UNITED STATES OF AMERICA 
 Before the 
 SECURITIES AND EXCHANGE COMMISSION 
 
SECURITIES EXCHANGE ACT OF 1934 
Release No. 100699 / August 14, 2024 
 
INVESTMENT ADVISERS ACT OF 1940 
Release No. 6650 / August 14, 2024 
 
ADMINISTRATIVE PROCEEDING 
File No. 3-21995 
 
 
In the Matter of 
 
Cetera Advisor Networks LLC 
and Cetera Investment Services 
LLC, 
 
Respondents. 
 
ORDER INSTITUTING ADMINISTRATIVE 
AND CEASE-AND-DESIST PROCEEDINGS, 
PURSUANT TO SECTIONS 15(b) AND 21C 
OF THE SECURITIES EXCHANGE ACT OF 
1934 AND SECTIONS 203(e) AND 203(k) OF 
THE INVESTMENT ADVISERS ACT OF 
1940, 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 Cetera Advisor Networks LLC (“CANL”) and Cetera Investment 
Services LLC (“CISL”) (collectively, “Respondents” or “Cetera”) and Sections 203(e) and 
203(k) of the Investment Advisers Act of 1940 (“Advisers Act”) against CANL. 
 
II. 
 In anticipation of the institution of these proceedings, Respondents have submitted Offers 
of Settlement (“Offers”) that the Commission has determined to accept.  Respondents admit the 
facts set forth in Section III below, acknowledge that their conduct violated the federal securities 
laws, admit the Commission’s jurisdiction over them and the subject matter of these proceedings, 
and consent 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 and 
Sections 203(e) and 203(k) of the Investment Advisers Act of 1940, Making Findings, and 
Imposing Remedial Sanctions and a Cease-and-Desist Order (“Order”), as set forth below.   
 

 
 
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III. 
 On the basis of this Order and Respondents’ Offers, the Commission finds
1
 that: 
 
Summary 
1. The federal securities laws impose recordkeeping requirements on broker-dealers 
and registered investment advisers 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.  These 
proceedings arise out of Cetera’s identification—and self-report—of widespread failures of 
certain Cetera employees throughout the firms, including at senior levels, to adhere to certain of 
these essential requirements and Cetera’s own policies.  Using their personal devices, these 
employees communicated both internally and externally by text messages, which were not an 
approved written communications platform (“off-channel communications”). 
2. After Cetera’s compliance staff identified business-related electronic 
communications on a non-approved platform on personal devices, Cetera conducted an internal 
investigation and self-reported the facts to Commission staff.  Respondents proactively identified 
key documents and facts, which assisted the Commission staff in efficiently investigating the 
conduct.  Prior to contacting the Division of Enforcement, Respondents also undertook 
significant remedial measures relating to their recordkeeping practices, policies and procedures, 
and related supervisory practices. 
3. From at least August 2019, Cetera employees sent and received off-channel 
communications that related to CANL’s and CISL’s broker-dealer businesses and with respect to 
CANL’s investment advisory business, off-channel communications related to recommendations 
made or proposed to be made and advice given or proposed to be given.  Respondents did not 
maintain or preserve the substantial majority of these written communications.  Respondents’ 
failures were firm-wide and involved employees at various levels of authority.  As a result, 
Respondents violated Section 17(a) of the Exchange Act and Rule 17a-4(b)(4) thereunder and 
CANL violated Section 204 of the Advisers Act and Rule 204-2(a)(7) thereunder. 
4. Cetera’s supervisors, who were responsible for supervising junior employees, 
routinely communicated off-channel using their personal devices.  In fact, senior leaders and 
officers responsible for supervising junior employees themselves failed to comply with CANL’s 
and CISL’s policies by communicating using non-firm approved methods on their personal 
devices about CANL’s and CISL’s broker-dealers and CANL’s investment adviser business.  
5. CANL’s and CISL’s widespread failure to implement their policies and 
procedures that prohibit such communications led to their failure reasonably to supervise their 
 
1
  The findings herein are made pursuant to Respondents’ Offers of Settlement and are not 
binding on any other person or entity in this or any other proceeding.  

 
 
3 
employees within the meaning of Section 15(b)(4)(E) of the Exchange Act as to each of the 
Respondents, as well as Section 203(e)(6) of the Advisers Act as to CANL.  
6. During the time period that CANL and CISL failed to maintain and preserve 
off-channel communications that their employees sent and received related to their broker-dealer 
businesses and CANL’s investment adviser business, CANL and CISL received and responded 
to Commission subpoenas for documents and/or records requests in numerous Commission 
investigations.  As a result, CANL’s and CISL’s recordkeeping failures likely impacted the 
Commission’s ability to carry out its regulatory functions and investigate violations of the 
federal securities laws across these investigations.   
7. After Cetera initiated a review of their recordkeeping efforts, CANL and CISL 
identified failures and self-reported their conduct, and further enhanced their ongoing programs 
of remediation.  As set forth in the Undertakings below, CANL and CISL will retain an 
independent compliance consultant to review and assess CANL’s and CISL’s remedial steps 
relating to CANL’s and CISL’s recordkeeping practices, policies and procedures, related 
supervisory practices, and employment actions. 
Respondents 
8. Cetera Advisor Networks LLC (“CANL”) is a Delaware limited liability 
company with its principal office in El Segundo, California and is registered with the 
Commission as a broker-dealer.  CANL also was previously registered with the Commission as 
an investment adviser from February 2001 until July 6, 2023, when its withdrawal of its 
registration on Form ADV-W became effective.  CANL is a subsidiary of Cetera Financial 
Group, Inc. 
9. Cetera Investment Services LLC (“CISL”) is a Delaware limited liability 
company with its principal office in St. Cloud, Minnesota and is registered with the Commission 
as a broker-dealer.  CISL is a subsidiary of Cetera Financial Group, Inc. 
Recordkeeping Requirements under the Exchange and Advisers Acts 
10. Section 17(a)(1) of the Exchange Act and Section 204 of the Advisers Act 
authorize the Commission to issue rules requiring, respectively, broker-dealers and investment 
advisers 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, with respect to 
the Exchange Act, otherwise in furtherance of the purposes of the Exchange Act. 
11. The Commission adopted Rule 17a-4 under the Exchange Act and Rule 204-2 
under the Advisers Act pursuant to this authority.  These rules specify the manner and length of 
time that the records created in accordance with Commission rules, and certain other records 
produced by broker-dealers or investment advisers, must be maintained and produced promptly 
to Commission representatives.   
12. The rules adopted under Section 17(a)(1) of the Exchange Act, including Rule 
17a-4(b)(4), require that broker-dealers preserve in an easily accessible place originals of all 

 
 
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communications received and copies of all communications sent relating to a firm’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. 
13. 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). 
14. The rules adopted under Advisers Act Section 204, including Advisers Act Rule 
204-2(a)(7), require that investment advisers preserve in an easily accessible place originals of all 
communications received and copies of all written communications sent relating to:  (a) any 
recommendation made or proposed to be made and any advice given or proposed to be given; 
(b) any receipt, disbursement or delivery of funds or securities; (c) the placing or execution of any 
order to purchase or sell any security; or (d) predecessor performance and the performance or rate 
of return of any or all managed accounts, portfolios, or securities recommendations. 
CANL’s and CISL’s Policies and Procedures 
15. CANL and CISL maintained certain policies and procedures designed to ensure 
the retention of business-related records, including electronic communications, in compliance 
with the relevant recordkeeping provisions.   
16. CANL and CISL employees 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 their personal devices. 
17. Messages sent through firm-approved communications methods were monitored, 
subject to review, and, when appropriate, archived.  Messages sent through unapproved 
communications methods, such as unapproved applications on personal devices, were not 
monitored, subject to review or archived. 
18. CANL’s and CISL’s policies were designed to address supervisors’ supervision of 
employees’ training in CANL’s and CISL’s communications policies and adherence to CANL’s 
and CISL’s books and recordkeeping requirements.  Supervisory policies notified employees that 
electronic communications were subject to surveillance by CANL and CISL.  CANL and CISL 
had procedures for all employees, including supervisors, requiring annual self-attestations of 
compliance.  
19. CANL and CISL, however, failed to implement systems to determine that all 
personnel, including supervisors, were reasonably following CANL’s and CISL’s policies.  
While permitting employees to use approved communications methods, including on personal 

 
 
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phones, for business communications, CANL and CISL failed to implement sufficient 
monitoring to ensure that their recordkeeping and communications policies were being followed.  
CANL’s and CISL’s Recordkeeping Failures Across Their Businesses 
20. 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 January 2024, Cetera voluntarily contacted the staff regarding 
certain off-channel communications that they had identified related to the businesses of CANL and 
CISL.  Cetera cooperated with the staff’s investigation by proactively gathering communications 
from the personal devices of their personnel and responding to the staff’s requests for additional 
information.  As reported to the Commission staff, Cetera personnel who had engaged in the use of 
off-channel communications included senior leaders and officers across each firm. 
21. Cetera alerted the Commission staff to numerous off-channel communications at 
various seniority levels of Cetera’s broker-dealer businesses.  In addition, CANL’s investigation 
uncovered the use of off-channel communications at various seniority levels within CANL’s 
investment advisory business.  Respondents collected data from a sampling of broker-dealer and 
investment adviser personnel and found that some had engaged in at least some level of off-
channel communications since August 2019.  Overall, these personnel sent and received 
numerous off-channel communications, involving other Cetera personnel and external contacts 
in the securities industry.  As disclosed to the Commission staff, within Cetera, a number of 
senior leaders participated in off-channel communications. 
22. From at least August 2019, CANL and CISL personnel sent and received 
off-channel communications that concerned the businesses of the broker-dealers. 
23. For example, between August 2019 and the present, a senior leader at CANL 
exchanged numerous off-channel communications with external contacts in the securities 
industry.  These communications related to CANL’s broker-dealer business as such. 
24. In addition, from May 2022 to March 2023, two CISL vice presidents exchanged 
numerous off-channel communications with their colleagues, including junior employees under 
their supervision.  These communications related to CISL’s broker-dealer business as such. 
 
25. From at least August 2019, CANL investment adviser personnel sent and received 
off-channel communications subject to the record-keeping requirements of Advisers Act Rule 
204-2. 
 
26. For example, in May 2020, investment adviser personnel at CANL exchanged 
off-channel communications related to advice about investment recommendations made or 
proposed to be made for advisory client accounts. 
 

 
 
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CANL’s and CISL’s Failures to Preserve Required Records Potentially 
Compromised and Delayed Commission Matters 
27. Between August 2019 and the present, CANL and CISL received and responded 
to subpoenas for documents and/or records requests in Commission investigations.  By failing to 
maintain and preserve required records relating to their businesses, CANL and CISL likely 
deprived the Commission of off-channel communications in various investigations. 
CANL’s and CISL’s Violations and Failure to Supervise 
28. As a result of the conduct described above, from at least August 2019 through the 
date of this Order, CANL and CISL willfully
2
 violated Section 17(a) of the Exchange Act and 
Rule 17a-4(b)(4) thereunder.   
29. As a result of the conduct described above, from at least August 2019 through the 
date of this Order, CANL willfully violated Section 204 of the Advisers Act and Rule 204-2(a)(7) 
thereunder. 
30. As a result of the conduct described above, CANL and CISL failed reasonably to 
supervise their employees with a view to preventing or detecting certain of their employees’ 
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.  
31. As a result of the conduct described above, CANL failed reasonably to supervise its 
employees with a view to preventing or detecting certain of its employees’ aiding and abetting 
violations of Section 204 of the Advisers Act and Rule 204-2(a)(7) thereunder, within the 
meaning of Section 203(e)(6) of the Advisers Act. 
CANL’s and CISL’s Remedial and Cooperation Efforts 
32. In determining to accept the Offers, the Commission considered CANL’s and 
CISL’s self-report, cooperation afforded to Commission staff, and remediation.  After identifying 
off-channel communications, Respondents conducted an internal investigation and self-reported 
the facts to Commission staff.  Prior to approaching Commission staff, CANL and CISL had 
begun a program of remediation, which included strengthening their policies and procedures by 
making investments in new technologies to improve surveillance and retention efforts, including 
 
2
  “Willfully,” for purposes of imposing relief under Section 15(b) of the Exchange Act and 
Section 203(e) of the Advisers Act “‘means no more than that the person charged with the duty 
knows what he is doing.’”  See 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)).  There is no requirement that the actor 
“also be aware that he is violating one of the Rules or Acts.”  Tager v. SEC, 344 F.2d 5, 8 (2d 
Cir. 1965).  The decision in The Robare Group, Ltd. v. SEC, which construed the term 
“willfully” for purposes of a differently structured statutory provision, does not alter that 
standard.  922 F.3d 468, 478-79 (D.C. Cir. 2019) (setting forth the showing required to establish 
that a person has “willfully omit[ted]” material information from a required disclosure in 
violation of Section 207 of the Advisers Act). 

 
 
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rolling out an on-channel messaging application to their employees in September 2020, increasing 
the number of trainings, and sending firm-wide reminders that emphasized the importance of 
complying with recordkeeping obligations. 
Undertakings 
33. Prior to this action, CANL and CISL enhanced their policies and procedures, and 
increased training concerning the use of approved communications methods, including on 
personal devices, and began implementing significant changes to the technology available to 
employees.  In addition, CANL and CISL have undertaken to: 
34. Independent Compliance Consultant. 
a.  CANL and CISL shall each retain, within thirty (30) days of the entry of this 
Order, the services of an independent compliance consultant (“Compliance Consultant”) 
that is not unacceptable to the Commission staff.  The Compliance Consultant’s 
compensation and expenses shall be borne exclusively by CANL and CISL. 
 
b.  CANL and CISL will oversee the work of the Compliance Consultant. 
 
c.  CANL and CISL shall provide to the Commission staff, within sixty (60) days 
of the entry of this Order, a copy of the engagement letter detailing the Compliance 
Consultant’s responsibilities, which shall include a comprehensive compliance review as 
described below.  CANL and CISL shall require that, within ninety (90) days of the date 
of the engagement letter, the Compliance Consultant conduct: 
 
i.  A comprehensive review of CANL’s and CISL’s supervisory, 
compliance, and other policies and procedures designed to ensure that CANL’s 
and CISL’s electronic communications, including those found on personal 
electronic devices, including without limitation, cellular phones (“Personal 
Devices”), are preserved in accordance with the requirements of the federal 
securities laws. 
 
ii.  A comprehensive review of training conducted by CANL and CISL to 
ensure personnel are complying with the requirements regarding the preservation 
of electronic communications, including those found on Personal Devices, in 
accordance with the requirements of the federal securities laws, including by 
ensuring that CANL and CISL personnel certify in writing on a quarterly basis 
that they are complying with preservation requirements.  
 
iii.  An assessment of the surveillance program measures implemented by 
CANL and CISL to ensure compliance, on an ongoing basis, with the 
requirements found in the federal securities laws to preserve electronic 
communications, including those found on Personal Devices. 
 
iv.  An assessment of the technological solutions that CANL and CISL 
have begun implementing to meet the record retention requirements of the federal 

 
 
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securities laws, including an assessment of the likelihood that CANL and CISL 
personnel will use the technological solutions going forward and a review of the 
measures employed by CANL and CISL to track employee usage of new 
technological solutions.  
 
v.  An assessment of the measures used by CANL and CISL to prevent the 
use of unauthorized communications methods for business communications by 
employees.  This assessment should include, but not be limited to, a review of 
CANL’s and CISL’s policies and procedures to ascertain if they provide for any 
significant technology and/or behavioral restrictions that help prevent the risk of 
the use of unapproved communications methods on Personal Devices (e.g., 
trading floor restrictions).   
 
vi.  A review of CANL’s and CISL’s electronic communications 
surveillance routines to ensure that electronic communications through approved 
communications methods found on Personal Devices are incorporated into 
CANL’s and CISL’s overall communications surveillance program.   
 
vii.  A comprehensive review of the framework adopted by CANL and 
CISL to address instances of non-compliance by CANL and CISL employees 
with CANL’s and CISL’s policies and procedures concerning the use of Personal 
Devices to communicate about CANL and CISL business in the past.  This review 
shall include a survey of how CANL and CISL determined which employees 
failed to comply with CANL’s and CISL’s policies and procedures, the corrective 
action carried out, an evaluation of who violated policies and why, what penalties 
were imposed, and whether penalties were handed out consistently across 
business lines and seniority levels.   
 
d.  CANL and CISL shall require that, within forty-five (45) days after 
completion of the review set forth in sub-paragraphs 34.c.i. through c.vii. above, the 
Compliance Consultant shall submit a detailed written report of its findings to CANL and 
CISL, and to the Commission staff (the “Report”).  CANL and CISL shall require that the 
Report include a description of the review performed, the names of the individuals who 
performed the review, the conclusions reached, the Compliance Consultant’s 
recommendations for changes in or improvements to CANL’s and CISL’s policies and 
procedures, and a summary of the plan for implementing the recommended changes in or 
improvements to CANL’s and CISL’s policies and procedures. 
 
e.  CANL and CISL shall adopt all recommendations contained in the Report 
within ninety (90) days of the date of the Report; provided, however, that within forty-
five (45) days after the date of the Report, CANL and CISL shall advise the Compliance 
Consultant and the Commission staff in writing of any recommendations that CANL 
and/or CISL considers to be unduly burdensome, impractical, or inappropriate.  With 
respect to any recommendation that CANL and/or CISL considers unduly burdensome, 
impractical, or inappropriate, CANL and/or CISL need not adopt such recommendation 

 
 
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at that time, but shall propose in writing an alternative policy, procedure, or disclosure 
designed to achieve the same objective or purpose. 
 
f.  As to any recommendation concerning CANL’s and CISL’s policies or 
procedures on which CANL and CISL and the Compliance Consultant do not agree, 
CANL and CISL and the Compliance Consultant shall attempt in good faith to reach an 
agreement within sixty (60) days after the date of the Report.  Within fifteen (15) days 
after the conclusion of the discussion and evaluation by CANL and CISL and the 
Compliance Consultant, CANL and CISL shall require that the Compliance Consultant 
inform CANL and CISL and the Commission staff in writing of the Compliance 
Consultant’s final determination concerning any recommendation that CANL and/or 
CISL consider to be unduly burdensome, impractical, or inappropriate.  CANL and CISL 
shall abide by the determinations of the Compliance Consultant and, within sixty (60) 
days after final agreement between CANL and CISL and the Compliance Consultant or 
final determination by the Compliance Consultant, whichever occurs first, CANL and 
CISL shall adopt and implement all of the recommendations that the Compliance 
Consultant deems appropriate. 
 
g.  CANL and CISL shall cooperate fully with the Compliance Consultant and 
shall provide the Compliance Consultant with access to such of CANL’s and CISL’s 
files, books, records, and personnel as are reasonably requested by the Compliance 
Consultant for review. 
 
h. CANL and CISL shall not have the authority to terminate the Compliance 
Consultant or substitute another compliance consultant for the initial Compliance 
Consultant, without the prior written approval of the Commission staff.  CANL and CISL 
shall compensate the Compliance Consultant and persons engaged to assist the 
Compliance Consultant for services rendered under this Order at their reasonable and 
customary rates. 
 
i.  For the period of engagement and for a period of two years from completion of 
the engagement, CANL and CISL shall not (i) retain the Compliance Consultant for any 
other professional services outside of the services described in this Order; (ii) enter into 
any other professional relationship with the Compliance Consultant, including any 
employment, consultant, attorney-client, auditing or other professional relationship; or 
(iii) enter, without prior written consent of the Commission staff, into any such 
professional relationship with any of the Compliance Consultant’s present or former 
affiliates, employers, directors, officers, employees, or agents acting in their capacity as 
such. 
 
j.  The Report by the Compliance Consultant will likely include confidential 
financial, proprietary, competitive business or commercial information.  Public disclosure 
of the Report could discourage cooperation, impede pending or potential government 
investigations or undermine the objectives of the reporting requirement.  For these 
reasons, among others, the Report and the contents thereof are intended to remain and 
shall remain non-public, except (1) pursuant to court order, (2) as agreed to by the parties 

 
 
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in writing, (3) to the extent that the Commission determines in its sole discretion that 
disclosure would be in furtherance of the Commission’s discharge of its duties and 
responsibilities, or (4) as otherwise required by law. 
 
35. One-Year Evaluation. CANL and CISL shall each require the Compliance 
Consultant to assess CANL’s and CISL’s program for the preservation, as required under the 
federal securities laws, of electronic communications, including those found on Personal 
Devices, commencing one year after submitting the Report required by Paragraph 34.d above.  
CANL and CISL shall require this review to evaluate CANL’s and CISL’s progress in the areas 
described in Paragraphs 34.c.i through 34.c.vii above.  After this review, CANL and CISL shall 
require the Compliance Consultant to submit a report (the “One Year Report”) to each of CANL 
and CISL, and the Commission staff and shall ensure that the One Year Report includes an 
updated assessment of CANL’s and CISL’s policies and procedures with regard to the 
preservation of electronic communications (including those found on Personal Devices), training, 
surveillance programs, and technological solutions implemented in the prior year period.  
36. Reporting Discipline Imposed.  For two years following the entry of this Order, 
CANL and CISL shall notify the Commission staff as follows upon the imposition of any 
discipline imposed by CANL and CISL, including, but not limited to, written warnings, loss of any 
pay, bonus, or incentive compensation, or the termination of employment, with respect to any 
employee found to have violated CANL’s and CISL’s policies and procedures concerning the 
preservation of electronic communications, including those found on Personal Devices:  at least 48 
hours before the filing of a Form U-5, or within ten (10) days of the imposition of other discipline.   
37. Internal Audit.  In addition to the Compliance Consultant’s review and issuance of 
the One Year Report, CANL and CISL will each also have its respective Internal Audit function 
conduct a separate audit(s) to assess CANL’s and CISL’s progress in the areas described in 
Paragraphs 34.c.i through 34.c.vii above.  After completion of this audit(s), CANL and CISL shall 
ensure that Internal Audit submits a report to each of CANL and CISL, and to the Commission 
staff. 
38. Recordkeeping.  CANL and CISL shall each preserve, for a period of not less than 
six (6) years from the end of the fiscal year last used, the first two (2) years in an easily 
accessible place, any record of compliance with these undertakings.  CANL shall also preserve 
any record of compliance with these undertakings in an easily accessible place for a period of not 
less than five (5) years from the end of the fiscal year during which the entry was made on such 
record, the first two (2) years in an appropriate office of CANL.  
 
39. Deadlines.  For good cause shown, the Commission staff may extend any of the 
procedural dates relating to the undertakings.  Deadlines for procedural dates shall be counted in 
calendar days, except that if the last day falls on a weekend or federal holiday, the next business 
day shall be considered to be the last day. 
40. Certification.  CANL and CISL shall each certify, in writing, compliance with the 
undertakings set forth above.  The certification shall identify the undertakings, provide written 
evidence of compliance in the form of a narrative, and be supported by exhibits sufficient to 
demonstrate compliance.  The Commission staff may make reasonable requests for further 

 
 
11 
evidence of compliance, and Respondents agree to provide such evidence.  The certification and 
supporting material shall be submitted to Anne C. McKinley, Assistant Regional Director, 
Division of Enforcement, Chicago Regional Office, 175 West Jackson Boulevard, Suite 1450, 
Chicago, Illinois 60604, or such other person as the Commission staff may request, with a copy 
to the Office of Chief Counsel of the Enforcement Division, no later than sixty (60) days from the 
date of the completion of the undertakings. 
IV. 
 In view of the foregoing, the Commission deems it appropriate and in the public interest 
to impose the sanctions agreed to in Respondents’ Offers. 
 
 Accordingly, pursuant to Sections 15(b) and 21C of the Exchange Act as to CANL and 
CISL and Sections 203(e) and 203(k) of the Advisers Act as to CANL, it is hereby ORDERED 
that: 
 
A. CANL and CISL 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. CANL cease and desist from committing or causing any violations and any future 
violations of Section 204 of the Advisers Act and Rule 204-2 thereunder. 
C. Respondents are censured.  
D. Respondents shall comply with the undertakings enumerated in paragraphs 33 to 
40 above. 
E. Respondents shall, jointly and severally, within 14 days of the entry of this Order, 
pay a civil money penalty in the amount of $4,500,000 to the Securities and Exchange 
Commission for transfer to the general fund of the United States Treasury, subject to Exchange 
Act Section 21F(g)(3).  If timely payment is not made, additional interest shall accrue pursuant 
to 31 U.S.C. § 3717.   
 Payment must be made in one of the following ways:   
 
(1) Respondents may transmit payment electronically to the Commission, 
which will provide detailed ACH transfer/Fedwire instructions upon 
request;  
 
(2) Respondents may make direct payment from a bank account via Pay.gov 
through the SEC website at http://www.sec.gov/about/offices/ofm.htm; or  
 
(3) Respondents may pay by certified check, bank cashier’s check, or United 
States postal money order, made payable to the Securities and Exchange 
Commission and hand-delivered or mailed to:  
 

 
 
12 
Enterprise Services Center 
Accounts Receivable Branch 
HQ Bldg., Room 181, AMZ-341 
6500 South MacArthur Boulevard 
Oklahoma City, OK 73169 
 
Payments by check or money order must be accompanied by a cover letter identifying 
CANL and CISL as the Respondents in these proceedings, and the file number of these 
proceedings; a copy of the cover letter and check or money order must be sent to Anne C. 
McKinley, Assistant Regional Director, Division of Enforcement, Chicago Regional Office, 175 
West Jackson Boulevard, Suite 1450, Chicago, Illinois 60604.   
 
F. Amounts ordered to be paid as civil money penalties pursuant to this Order shall 
be treated as penalties paid to the government for all purposes, including all tax purposes.  To 
preserve the deterrent effect of the civil penalty, Respondents agree that in any Related Investor 
Action, they shall not argue that they are entitled to, nor shall they benefit by, offset or reduction 
of any award of compensatory damages by the amount of any part of Respondents’ payment of a 
civil penalty in this action (“Penalty Offset”).  If the court in any Related Investor Action grants 
such a Penalty Offset, Respondents agree that they shall, within 30 days after entry of a final 
order granting the Penalty Offset, notify the Commission’s counsel in this action and pay the 
amount of the Penalty Offset to the Securities and Exchange Commission.  Such a payment shall 
not be deemed an additional civil penalty and shall not be deemed to change the amount of the 
civil penalty imposed in this proceeding.  For purposes of this paragraph, a “Related Investor 
Action” means a private damages action brought against Respondents by or on behalf of one or 
more investors based on substantially the same facts as alleged in the Order instituted by the 
Commission in this proceeding. 
 
 
 By the Commission. 
 
 
 
Vanessa A. Countryman 
       Secretary 

UNITED STATES OF AMERICA 

 Before the 

 SECURITIES AND EXCHANGE COMMISSION 

 

SECURITIES EXCHANGE ACT OF 1934 

Release No. 100699 / August 14, 2024 

 

INVESTMENT ADVISERS ACT OF 1940 

Release No. 6650 / August 14, 2024 

 

ADMINISTRATIVE PROCEEDING 

File No. 3-21995 

 

 

In the Matter of 

 

Cetera Advisor Networks LLC 

and Cetera Investment Services 

LLC, 

 

Respondents. 

 

ORDER INSTITUTING ADMINISTRATIVE 

AND CEASE-AND-DESIST PROCEEDINGS, 

PURSUANT TO SECTIONS 15(b) AND 21C 

OF THE SECURITIES EXCHANGE ACT OF 

1934 AND SECTIONS 203(e) AND 203(k) OF 

THE INVESTMENT ADVISERS ACT OF 

1940, 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 Cetera Advisor Networks LLC (“CANL”) and Cetera Investment 

Services LLC (“CISL”) (collectively, “Respondents” or “Cetera”) and Sections 203(e) and 

203(k) of the Investment Advisers Act of 1940 (“Advisers Act”) against CANL. 

 

II. 

 In anticipation of the institution of these proceedings, Respondents have submitted Offers 

of Settlement (“Offers”) that the Commission has determined to accept.  Respondents admit the 

facts set forth in Section III below, acknowledge that their conduct violated the federal securities 

laws, admit the Commission’s jurisdiction over them and the subject matter of these proceedings, 

and consent 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 and 

Sections 203(e) and 203(k) of the Investment Advisers Act of 1940, 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 Respondents’ Offers, the Commission finds1 that: 

 

Summary 

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

and registered investment advisers 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.  These 

proceedings arise out of Cetera’s identification—and self-report—of widespread failures of 

certain Cetera employees throughout the firms, including at senior levels, to adhere to certain of 

these essential requirements and Cetera’s own policies.  Using their personal devices, these 

employees communicated both internally and externally by text messages, which were not an 

approved written communications platform (“off-channel communications”). 

2. After Cetera’s compliance staff identified business-related electronic 

communications on a non-approved platform on personal devices, Cetera conducted an internal 

investigation and self-reported the facts to Commission staff.  Respondents proactively identified 

key documents and facts, which assisted the Commission staff in efficiently investigating the 

conduct.  Prior to contacting the Division of Enforcement, Respondents also undertook 

significant remedial measures relating to their recordkeeping practices, policies and procedures, 

and related supervisory practices. 

3. From at least August 2019, Cetera employees sent and received off-channel 

communications that related to CANL’s and CISL’s broker-dealer businesses and with respect to 

CANL’s investment advisory business, off-channel communications related to recommendations 

made or proposed to be made and advice given or proposed to be given.  Respondents did not 

maintain or preserve the substantial majority of these written communications.  Respondents’ 

failures were firm-wide and involved employees at various levels of authority.  As a result, 

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

CANL violated Section 204 of the Advisers Act and Rule 204-2(a)(7) thereunder. 

4. Cetera’s supervisors, who were responsible for supervising junior employees, 

routinely communicated off-channel using their personal devices.  In fact, senior leaders and 

officers responsible for supervising junior employees themselves failed to comply with CANL’s 

and CISL’s policies by communicating using non-firm approved methods on their personal 

devices about CANL’s and CISL’s broker-dealers and CANL’s investment adviser business.  

5. CANL’s and CISL’s widespread failure to implement their policies and 

procedures that prohibit such communications led to their failure reasonably to supervise their 

 
1  The findings herein are made pursuant to Respondents’ Offers of Settlement and are not 

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



 

 

3 

employees within the meaning of Section 15(b)(4)(E) of the Exchange Act as to each of the 

Respondents, as well as Section 203(e)(6) of the Advisers Act as to CANL.  

6. During the time period that CANL and CISL failed to maintain and preserve 

off-channel communications that their employees sent and received related to their broker-dealer 

businesses and CANL’s investment adviser business, CANL and CISL received and responded 

to Commission subpoenas for documents and/or records requests in numerous Commission 

investigations.  As a result, CANL’s and CISL’s recordkeeping failures likely impacted the 

Commission’s ability to carry out its regulatory functions and investigate violations of the 

federal securities laws across these investigations.   

7. After Cetera initiated a review of their recordkeeping efforts, CANL and CISL 

identified failures and self-reported their conduct, and further enhanced their ongoing programs 

of remediation.  As set forth in the Undertakings below, CANL and CISL will retain an 

independent compliance consultant to review and assess CANL’s and CISL’s remedial steps 

relating to CANL’s and CISL’s recordkeeping practices, policies and procedures, related 

supervisory practices, and employment actions. 

Respondents 

8. Cetera Advisor Networks LLC (“CANL”) is a Delaware limited liability 

company with its principal office in El Segundo, California and is registered with the 

Commission as a broker-dealer.  CANL also was previously registered with the Commission as 

an investment adviser from February 2001 until July 6, 2023, when its withdrawal of its 

registration on Form ADV-W became effective.  CANL is a subsidiary of Cetera Financial 

Group, Inc. 

9. Cetera Investment Services LLC (“CISL”) is a Delaware limited liability 

company with its principal office in St. Cloud, Minnesota and is registered with the Commission 

as a broker-dealer.  CISL is a subsidiary of Cetera Financial Group, Inc. 

Recordkeeping Requirements under the Exchange and Advisers Acts 

10. Section 17(a)(1) of the Exchange Act and Section 204 of the Advisers Act 

authorize the Commission to issue rules requiring, respectively, broker-dealers and investment 

advisers 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, with respect to 

the Exchange Act, otherwise in furtherance of the purposes of the Exchange Act. 

11. The Commission adopted Rule 17a-4 under the Exchange Act and Rule 204-2 

under the Advisers Act pursuant to this authority.  These rules specify the manner and length of 

time that the records created in accordance with Commission rules, and certain other records 

produced by broker-dealers or investment advisers, must be maintained and produced promptly 

to Commission representatives.   

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

17a-4(b)(4), require that broker-dealers preserve in an easily accessible place originals of all 



 

 

4 

communications received and copies of all communications sent relating to a firm’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. 

13. 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). 

14. The rules adopted under Advisers Act Section 204, including Advisers Act Rule 

204-2(a)(7), require that investment advisers preserve in an easily accessible place originals of all 

communications received and copies of all written communications sent relating to:  (a) any 

recommendation made or proposed to be made and any advice given or proposed to be given; 

(b) any receipt, disbursement or delivery of funds or securities; (c) the placing or execution of any 

order to purchase or sell any security; or (d) predecessor performance and the performance or rate 

of return of any or all managed accounts, portfolios, or securities recommendations. 

CANL’s and CISL’s Policies and Procedures 

15. CANL and CISL maintained certain policies and procedures designed to ensure 

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

with the relevant recordkeeping provisions.   

16. CANL and CISL employees 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 their personal devices. 

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

subject to review, and, when appropriate, archived.  Messages sent through unapproved 

communications methods, such as unapproved applications on personal devices, were not 

monitored, subject to review or archived. 

18. CANL’s and CISL’s policies were designed to address supervisors’ supervision of 

employees’ training in CANL’s and CISL’s communications policies and adherence to CANL’s 

and CISL’s books and recordkeeping requirements.  Supervisory policies notified employees that 

electronic communications were subject to surveillance by CANL and CISL.  CANL and CISL 

had procedures for all employees, including supervisors, requiring annual self-attestations of 

compliance.  

19. CANL and CISL, however, failed to implement systems to determine that all 

personnel, including supervisors, were reasonably following CANL’s and CISL’s policies.  

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



 

 

5 

phones, for business communications, CANL and CISL failed to implement sufficient 

monitoring to ensure that their recordkeeping and communications policies were being followed.  

CANL’s and CISL’s Recordkeeping Failures Across Their Businesses 

20. 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 January 2024, Cetera voluntarily contacted the staff regarding 

certain off-channel communications that they had identified related to the businesses of CANL and 

CISL.  Cetera cooperated with the staff’s investigation by proactively gathering communications 

from the personal devices of their personnel and responding to the staff’s requests for additional 

information.  As reported to the Commission staff, Cetera personnel who had engaged in the use of 

off-channel communications included senior leaders and officers across each firm. 

21. Cetera alerted the Commission staff to numerous off-channel communications at 

various seniority levels of Cetera’s broker-dealer businesses.  In addition, CANL’s investigation 

uncovered the use of off-channel communications at various seniority levels within CANL’s 

investment advisory business.  Respondents collected data from a sampling of broker-dealer and 

investment adviser personnel and found that some had engaged in at least some level of off-

channel communications since August 2019.  Overall, these personnel sent and received 

numerous off-channel communications, involving other Cetera personnel and external contacts 

in the securities industry.  As disclosed to the Commission staff, within Cetera, a number of 

senior leaders participated in off-channel communications. 

22. From at least August 2019, CANL and CISL personnel sent and received 

off-channel communications that concerned the businesses of the broker-dealers. 

23. For example, between August 2019 and the present, a senior leader at CANL 

exchanged numerous off-channel communications with external contacts in the securities 

industry.  These communications related to CANL’s broker-dealer business as such. 

24. In addition, from May 2022 to March 2023, two CISL vice presidents exchanged 

numerous off-channel communications with their colleagues, including junior employees under 

their supervision.  These communications related to CISL’s broker-dealer business as such. 

 

25. From at least August 2019, CANL investment adviser personnel sent and received 

off-channel communications subject to the record-keeping requirements of Advisers Act Rule 

204-2. 

 

26. For example, in May 2020, investment adviser personnel at CANL exchanged 

off-channel communications related to advice about investment recommendations made or 

proposed to be made for advisory client accounts. 

 



 

 

6 

CANL’s and CISL’s Failures to Preserve Required Records Potentially 

Compromised and Delayed Commission Matters 

27. Between August 2019 and the present, CANL and CISL received and responded 

to subpoenas for documents and/or records requests in Commission investigations.  By failing to 

maintain and preserve required records relating to their businesses, CANL and CISL likely 

deprived the Commission of off-channel communications in various investigations. 

CANL’s and CISL’s Violations and Failure to Supervise 

28. As a result of the conduct described above, from at least August 2019 through the 

date of this Order, CANL and CISL willfully2 violated Section 17(a) of the Exchange Act and 

Rule 17a-4(b)(4) thereunder.   

29. As a result of the conduct described above, from at least August 2019 through the 

date of this Order, CANL willfully violated Section 204 of the Advisers Act and Rule 204-2(a)(7) 

thereunder. 

30. As a result of the conduct described above, CANL and CISL failed reasonably to 

supervise their employees with a view to preventing or detecting certain of their employees’ 

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.  

31. As a result of the conduct described above, CANL failed reasonably to supervise its 

employees with a view to preventing or detecting certain of its employees’ aiding and abetting 

violations of Section 204 of the Advisers Act and Rule 204-2(a)(7) thereunder, within the 

meaning of Section 203(e)(6) of the Advisers Act. 

CANL’s and CISL’s Remedial and Cooperation Efforts 

32. In determining to accept the Offers, the Commission considered CANL’s and 

CISL’s self-report, cooperation afforded to Commission staff, and remediation.  After identifying 

off-channel communications, Respondents conducted an internal investigation and self-reported 

the facts to Commission staff.  Prior to approaching Commission staff, CANL and CISL had 

begun a program of remediation, which included strengthening their policies and procedures by 

making investments in new technologies to improve surveillance and retention efforts, including 

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

Section 203(e) of the Advisers Act “‘means no more than that the person charged with the duty 

knows what he is doing.’”  See 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)).  There is no requirement that the actor 

“also be aware that he is violating one of the Rules or Acts.”  Tager v. SEC, 344 F.2d 5, 8 (2d 

Cir. 1965).  The decision in The Robare Group, Ltd. v. SEC, which construed the term 

“willfully” for purposes of a differently structured statutory provision, does not alter that 

standard.  922 F.3d 468, 478-79 (D.C. Cir. 2019) (setting forth the showing required to establish 

that a person has “willfully omit[ted]” material information from a required disclosure in 

violation of Section 207 of the Advisers Act). 



 

 

7 

rolling out an on-channel messaging application to their employees in September 2020, increasing 

the number of trainings, and sending firm-wide reminders that emphasized the importance of 

complying with recordkeeping obligations. 

Undertakings 

33. Prior to this action, CANL and CISL enhanced their policies and procedures, and 

increased training concerning the use of approved communications methods, including on 

personal devices, and began implementing significant changes to the technology available to 

employees.  In addition, CANL and CISL have undertaken to: 

34. Independent Compliance Consultant. 

a.  CANL and CISL shall each retain, within thirty (30) days of the entry of this 

Order, the services of an independent compliance consultant (“Compliance Consultant”) 

that is not unacceptable to the Commission staff.  The Compliance Consultant’s 

compensation and expenses shall be borne exclusively by CANL and CISL. 

 

b.  CANL and CISL will oversee the work of the Compliance Consultant. 

 

c.  CANL and CISL shall provide to the Commission staff, within sixty (60) days 

of the entry of this Order, a copy of the engagement letter detailing the Compliance 

Consultant’s responsibilities, which shall include a comprehensive compliance review as 

described below.  CANL and CISL shall require that, within ninety (90) days of the date 

of the engagement letter, the Compliance Consultant conduct: 

 

i.  A comprehensive review of CANL’s and CISL’s supervisory, 

compliance, and other policies and procedures designed to ensure that CANL’s 

and CISL’s electronic communications, including those found on personal 

electronic devices, including without limitation, cellular phones (“Personal 

Devices”), are preserved in accordance with the requirements of the federal 

securities laws. 

 

ii.  A comprehensive review of training conducted by CANL and CISL to 

ensure personnel are complying with the requirements regarding the preservation 

of electronic communications, including those found on Personal Devices, in 

accordance with the requirements of the federal securities laws, including by 

ensuring that CANL and CISL personnel certify in writing on a quarterly basis 

that they are complying with preservation requirements.  

 

iii.  An assessment of the surveillance program measures implemented by 

CANL and CISL to ensure compliance, on an ongoing basis, with the 

requirements found in the federal securities laws to preserve electronic 

communications, including those found on Personal Devices. 

 

iv.  An assessment of the technological solutions that CANL and CISL 

have begun implementing to meet the record retention requirements of the federal 



 

 

8 

securities laws, including an assessment of the likelihood that CANL and CISL 

personnel will use the technological solutions going forward and a review of the 

measures employed by CANL and CISL to track employee usage of new 

technological solutions.  

 

v.  An assessment of the measures used by CANL and CISL to prevent the 

use of unauthorized communications methods for business communications by 

employees.  This assessment should include, but not be limited to, a review of 

CANL’s and CISL’s policies and procedures to ascertain if they provide for any 

significant technology and/or behavioral restrictions that help prevent the risk of 

the use of unapproved communications methods on Personal Devices (e.g., 

trading floor restrictions).   

 

vi.  A review of CANL’s and CISL’s electronic communications 

surveillance routines to ensure that electronic communications through approved 

communications methods found on Personal Devices are incorporated into 

CANL’s and CISL’s overall communications surveillance program.   

 

vii.  A comprehensive review of the framework adopted by CANL and 

CISL to address instances of non-compliance by CANL and CISL employees 

with CANL’s and CISL’s policies and procedures concerning the use of Personal 

Devices to communicate about CANL and CISL business in the past.  This review 

shall include a survey of how CANL and CISL determined which employees 

failed to comply with CANL’s and CISL’s policies and procedures, the corrective 

action carried out, an evaluation of who violated policies and why, what penalties 

were imposed, and whether penalties were handed out consistently across 

business lines and seniority levels.   

 

d.  CANL and CISL shall require that, within forty-five (45) days after 

completion of the review set forth in sub-paragraphs 34.c.i. through c.vii. above, the 

Compliance Consultant shall submit a detailed written report of its findings to CANL and 

CISL, and to the Commission staff (the “Report”).  CANL and CISL shall require that the 

Report include a description of the review performed, the names of the individuals who 

performed the review, the conclusions reached, the Compliance Consultant’s 

recommendations for changes in or improvements to CANL’s and CISL’s policies and 

procedures, and a summary of the plan for implementing the recommended changes in or 

improvements to CANL’s and CISL’s policies and procedures. 

 

e.  CANL and CISL shall adopt all recommendations contained in the Report 

within ninety (90) days of the date of the Report; provided, however, that within forty-

five (45) days after the date of the Report, CANL and CISL shall advise the Compliance 

Consultant and the Commission staff in writing of any recommendations that CANL 

and/or CISL considers to be unduly burdensome, impractical, or inappropriate.  With 

respect to any recommendation that CANL and/or CISL considers unduly burdensome, 

impractical, or inappropriate, CANL and/or CISL need not adopt such recommendation 



 

 

9 

at that time, but shall propose in writing an alternative policy, procedure, or disclosure 

designed to achieve the same objective or purpose. 

 

f.  As to any recommendation concerning CANL’s and CISL’s policies or 

procedures on which CANL and CISL and the Compliance Consultant do not agree, 

CANL and CISL and the Compliance Consultant shall attempt in good faith to reach an 

agreement within sixty (60) days after the date of the Report.  Within fifteen (15) days 

after the conclusion of the discussion and evaluation by CANL and CISL and the 

Compliance Consultant, CANL and CISL shall require that the Compliance Consultant 

inform CANL and CISL and the Commission staff in writing of the Compliance 

Consultant’s final determination concerning any recommendation that CANL and/or 

CISL consider to be unduly burdensome, impractical, or inappropriate.  CANL and CISL 

shall abide by the determinations of the Compliance Consultant and, within sixty (60) 

days after final agreement between CANL and CISL and the Compliance Consultant or 

final determination by the Compliance Consultant, whichever occurs first, CANL and 

CISL shall adopt and implement all of the recommendations that the Compliance 

Consultant deems appropriate. 

 

g.  CANL and CISL shall cooperate fully with the Compliance Consultant and 

shall provide the Compliance Consultant with access to such of CANL’s and CISL’s 

files, books, records, and personnel as are reasonably requested by the Compliance 

Consultant for review. 

 

h. CANL and CISL shall not have the authority to terminate the Compliance 

Consultant or substitute another compliance consultant for the initial Compliance 

Consultant, without the prior written approval of the Commission staff.  CANL and CISL 

shall compensate the Compliance Consultant and persons engaged to assist the 

Compliance Consultant for services rendered under this Order at their reasonable and 

customary rates. 

 

i.  For the period of engagement and for a period of two years from completion of 

the engagement, CANL and CISL shall not (i) retain the Compliance Consultant for any 

other professional services outside of the services described in this Order; (ii) enter into 

any other professional relationship with the Compliance Consultant, including any 

employment, consultant, attorney-client, auditing or other professional relationship; or 

(iii) enter, without prior written consent of the Commission staff, into any such 

professional relationship with any of the Compliance Consultant’s present or former 

affiliates, employers, directors, officers, employees, or agents acting in their capacity as 

such. 

 

j.  The Report by the Compliance Consultant will likely include confidential 

financial, proprietary, competitive business or commercial information.  Public disclosure 

of the Report could discourage cooperation, impede pending or potential government 

investigations or undermine the objectives of the reporting requirement.  For these 

reasons, among others, the Report and the contents thereof are intended to remain and 

shall remain non-public, except (1) pursuant to court order, (2) as agreed to by the parties 



 

 

10 

in writing, (3) to the extent that the Commission determines in its sole discretion that 

disclosure would be in furtherance of the Commission’s discharge of its duties and 

responsibilities, or (4) as otherwise required by law. 

 

35. One-Year Evaluation. CANL and CISL shall each require the Compliance 

Consultant to assess CANL’s and CISL’s program for the preservation, as required under the 

federal securities laws, of electronic communications, including those found on Personal 

Devices, commencing one year after submitting the Report required by Paragraph 34.d above.  

CANL and CISL shall require this review to evaluate CANL’s and CISL’s progress in the areas 

described in Paragraphs 34.c.i through 34.c.vii above.  After this review, CANL and CISL shall 

require the Compliance Consultant to submit a report (the “One Year Report”) to each of CANL 

and CISL, and the Commission staff and shall ensure that the One Year Report includes an 

updated assessment of CANL’s and CISL’s policies and procedures with regard to the 

preservation of electronic communications (including those found on Personal Devices), training, 

surveillance programs, and technological solutions implemented in the prior year period.  

36. Reporting Discipline Imposed.  For two years following the entry of this Order, 

CANL and CISL shall notify the Commission staff as follows upon the imposition of any 

discipline imposed by CANL and CISL, including, but not limited to, written warnings, loss of any 

pay, bonus, or incentive compensation, or the termination of employment, with respect to any 

employee found to have violated CANL’s and CISL’s policies and procedures concerning the 

preservation of electronic communications, including those found on Personal Devices:  at least 48 

hours before the filing of a Form U-5, or within ten (10) days of the imposition of other discipline.   

37. Internal Audit.  In addition to the Compliance Consultant’s review and issuance of 

the One Year Report, CANL and CISL will each also have its respective Internal Audit function 

conduct a separate audit(s) to assess CANL’s and CISL’s progress in the areas described in 

Paragraphs 34.c.i through 34.c.vii above.  After completion of this audit(s), CANL and CISL shall 

ensure that Internal Audit submits a report to each of CANL and CISL, and to the Commission 

staff. 

38. Recordkeeping.  CANL and CISL shall each preserve, for a period of not less than 

six (6) years from the end of the fiscal year last used, the first two (2) years in an easily 

accessible place, any record of compliance with these undertakings.  CANL shall also preserve 

any record of compliance with these undertakings in an easily accessible place for a period of not 

less than five (5) years from the end of the fiscal year during which the entry was made on such 

record, the first two (2) years in an appropriate office of CANL.  
 

39. Deadlines.  For good cause shown, the Commission staff may extend any of the 

procedural dates relating to the undertakings.  Deadlines for procedural dates shall be counted in 

calendar days, except that if the last day falls on a weekend or federal holiday, the next business 

day shall be considered to be the last day. 

40. Certification.  CANL and CISL shall each certify, in writing, compliance with the 

undertakings set forth above.  The certification shall identify the undertakings, provide written 

evidence of compliance in the form of a narrative, and be supported by exhibits sufficient to 

demonstrate compliance.  The Commission staff may make reasonable requests for further 



 

 

11 

evidence of compliance, and Respondents agree to provide such evidence.  The certification and 

supporting material shall be submitted to Anne C. McKinley, Assistant Regional Director, 

Division of Enforcement, Chicago Regional Office, 175 West Jackson Boulevard, Suite 1450, 

Chicago, Illinois 60604, or such other person as the Commission staff may request, with a copy 

to the Office of Chief Counsel of the Enforcement Division, no later than sixty (60) days from the 

date of the completion of the undertakings. 

IV. 

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

to impose the sanctions agreed to in Respondents’ Offers. 

 

 Accordingly, pursuant to Sections 15(b) and 21C of the Exchange Act as to CANL and 

CISL and Sections 203(e) and 203(k) of the Advisers Act as to CANL, it is hereby ORDERED 

that: 

 

A. CANL and CISL 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. CANL cease and desist from committing or causing any violations and any future 

violations of Section 204 of the Advisers Act and Rule 204-2 thereunder. 

C. Respondents are censured.  

D. Respondents shall comply with the undertakings enumerated in paragraphs 33 to 

40 above. 

E. Respondents shall, jointly and severally, within 14 days of the entry of this Order, 

pay a civil money penalty in the amount of $4,500,000 to the Securities and Exchange 

Commission for transfer to the general fund of the United States Treasury, subject to Exchange 

Act Section 21F(g)(3).  If timely payment is not made, additional interest shall accrue pursuant 

to 31 U.S.C. § 3717.   

 Payment must be made in one of the following ways:   

 

(1) Respondents may transmit payment electronically to the Commission, 

which will provide detailed ACH transfer/Fedwire instructions upon 

request;  

 

(2) Respondents may make direct payment from a bank account via Pay.gov 

through the SEC website at http://www.sec.gov/about/offices/ofm.htm; or  

 

(3) Respondents may pay by certified check, bank cashier’s check, or United 

States postal money order, made payable to the Securities and Exchange 

Commission and hand-delivered or mailed to:  

 



 

 

12 

Enterprise Services Center 

Accounts Receivable Branch 

HQ Bldg., Room 181, AMZ-341 

6500 South MacArthur Boulevard 

Oklahoma City, OK 73169 

 

Payments by check or money order must be accompanied by a cover letter identifying 

CANL and CISL as the Respondents in these proceedings, and the file number of these 

proceedings; a copy of the cover letter and check or money order must be sent to Anne C. 

McKinley, Assistant Regional Director, Division of Enforcement, Chicago Regional Office, 175 

West Jackson Boulevard, Suite 1450, Chicago, Illinois 60604.   

 

F. Amounts ordered to be paid as civil money penalties pursuant to this Order shall 

be treated as penalties paid to the government for all purposes, including all tax purposes.  To 

preserve the deterrent effect of the civil penalty, Respondents agree that in any Related Investor 

Action, they shall not argue that they are entitled to, nor shall they benefit by, offset or reduction 

of any award of compensatory damages by the amount of any part of Respondents’ payment of a 

civil penalty in this action (“Penalty Offset”).  If the court in any Related Investor Action grants 

such a Penalty Offset, Respondents agree that they shall, within 30 days after entry of a final 

order granting the Penalty Offset, notify the Commission’s counsel in this action and pay the 

amount of the Penalty Offset to the Securities and Exchange Commission.  Such a payment shall 

not be deemed an additional civil penalty and shall not be deemed to change the amount of the 

civil penalty imposed in this proceeding.  For purposes of this paragraph, a “Related Investor 

Action” means a private damages action brought against Respondents by or on behalf of one or 

more investors based on substantially the same facts as alleged in the Order instituted by the 

Commission in this proceeding. 

 

 

 By the Commission. 

 

 

 

Vanessa A. Countryman 

       Secretary