In re Apex Clearing Corporation

 UNITED STATES OF AMERICA 
 Before the 
 SECURITIES AND EXCHANGE COMMISSION 
 
SECURITIES EXCHANGE ACT OF 1934 
Release No. 100702 / August 14, 2024 
 
ADMINISTRATIVE PROCEEDING 
File No. 3-21998 
 
 
In the Matter of 
 
Apex Clearing Corporation,  
 
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 Apex Clearing Corporation (“Respondent” or “Apex Clearing”). 
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. 
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 
 
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. 
 

 2 
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 the widespread failure of Apex Clearing employees 
throughout the firm, including at senior levels, to adhere to certain of these essential requirements 
and Apex Clearing’s own policies.  Using their personal devices, these employees communicated 
both internally and externally by personal text messages (“off-channel communications”). 
3. From at least January 2021, Apex Clearing employees sent and received off-
channel communications that related to the business of the broker-dealer operated by Apex 
Clearing.  Respondent did not maintain or preserve the substantial majority of these written 
communications.  Respondent’s failure was firm-wide and involved employees at various levels of 
authority.  As a result, Apex Clearing violated Section 17(a) of the Exchange Act and Rule 17a-
4(b)(4) thereunder.  
4. Apex Clearing’s supervisors, who were responsible for supervising junior 
employees, communicated off-channel using their personal devices.  In fact, senior officers and 
supervisors responsible for supervising junior employees themselves failed to comply with Apex 
Clearing’s policies by communicating using non-firm approved methods on their personal devices 
about Apex Clearing’s broker-dealer business. 
5. Apex Clearing’s widespread failure to implement its policies and procedures that 
prohibit such communications led to its failure to reasonably supervise its employees within the 
meaning of Section 15(b)(4)(E) of the Exchange Act. 
6. Apex Clearing has initiated a review of its recordkeeping failures and begun a 
program of remediation.  As set forth in the Undertakings below, Apex Clearing will retain an 
independent compliance consultant to review and assess Apex Clearing’s remedial steps relating to 
its recordkeeping practices, policies and procedures, related supervisory practices, and employment 
actions. 
Respondent 
7. Apex Clearing Corporation is a New York corporation with its principal office in 
Dallas, Texas, and is registered with the Commission as a broker-dealer. 
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.  This rule specifies the manner and length of time that the records created in accordance 

 3 
with Commission rules, and certain other records produced 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 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). 
Apex Clearing’s Policies and Procedures 
12. Apex Clearing 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. Apex Clearing 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 unapproved applications on their personal devices. 
14. Messages sent through firm-approved communications methods were monitored, 
subject to review, and archived.  Messages sent through unapproved communications methods, 
such as iMessage and SMS messages on personal devices, were not monitored, subject to review, 
or archived. 
15. Apex Clearing’s policies were designed to address supervisors’ supervision of 
employees’ training in the firm’s communications policies and adherence to the firm’s books and 
recordkeeping requirements.  Supervisory policies notified employees that electronic 
communications were subject to surveillance by Apex Clearing.  Apex Clearing had procedures for 
all employees, including supervisors, requiring annual self-attestations of compliance. 
16. Apex Clearing, however, failed to implement a system of follow-up and review to 
determine that supervisors were reasonably following Apex Clearing’s policies.  While permitting 
employees to use approved communications methods, including on personal phones, for business 
communications, Apex Clearing failed to implement sufficient monitoring to ensure that its 
recordkeeping and communications policies were being followed. 

 4 
Apex Clearing’s Recordkeeping Failures Across Its Brokerage Business 
17. In 2023, the Commission staff commenced an investigation related to whether 
Apex Clearing was properly retaining business-related messages sent and received on personal 
devices.  Apex Clearing cooperated with the investigation by voluntarily interviewing a sampling 
of senior personnel and gathering and reviewing messages found on the individuals’ personal 
devices.  These personnel included certain members of senior leadership.   
18. The Commission staff’s investigation uncovered off-channel communications at 
various seniority levels of Apex Clearing.  The investigation determined that all broker-dealer 
personnel sampled had engaged in at least some level of off-channel communications.  Overall, 
these personnel sent and received numerous off-channel communications, involving other Apex 
Clearing personnel and other participants in the securities industry.  Within Apex Clearing, senior 
leadership participated in off-channel communications. 
19. From at least January 2021, Apex Clearing personnel sent and received off-channel 
messages that concerned the broker-dealer’s business. 
20. For example, from January 2021 through December 2021, a senior officer at Apex 
Clearing exchanged numerous business-related off-channel messages with at least 32 Apex 
Clearing colleagues and four external contacts in the securities industry.  Within Apex Clearing, 
this senior officer communicated with junior employees under their supervision.  These messages 
related to the broker-dealer’s business as such. 
21. In addition, from January 2021 through December 2021, a department head of 
Apex Clearing exchanged numerous business-related off-channel messages with at least 46 Apex 
Clearing colleagues and 21 external contacts in the securities industry.  Within Apex Clearing, this 
department head communicated with junior employees under their supervision.  These messages 
related to the broker-dealer’s business as such. 
22. Also, from May 2021 through December 2021, another department head of Apex 
Clearing exchanged business-related off-channel messages with at least six Apex Clearing 
colleagues and 15 external contacts in the securities industry.  Within Apex Clearing, this 
department head communicated with junior employees under their supervision.  These messages 
related to the broker-dealer’s business as such. 
Apex Clearing’s Violations and Failure to Supervise 
23. As a result of the conduct described above, from at least January 2021 through the 
date of this Order, Apex Clearing willfully
2
 violated Section 17(a) of the Exchange Act and Rule 
17a-4(b)(4) thereunder, which require broker-dealers to preserve for at least three years originals 
 
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)).  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). 

 5 
of all communications received and copies of all communications sent relating to their business 
as such. 
24. As a result of the conduct described above, Apex Clearing failed reasonably to 
supervise its employees with a view to preventing or detecting certain of its 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. 
Apex Clearing’s Remedial Efforts 
25. In determining to accept the Offer, the Commission considered cooperation 
afforded the Commission staff and steps promptly undertaken by Apex Clearing prior to and 
after being approached by the Commission staff, including a firm-wide lookback effort to 
collect, image, review, and archive all business-related off-channel communications on 
employee personal devices. 
Undertakings 
26. Prior to this action, Apex Clearing enhanced its 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, Apex Clearing has undertaken to: 
27. Independent Compliance Consultant. 
a.  Apex Clearing shall 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 Apex Clearing. 
b.  Apex Clearing will oversee the work of the Compliance Consultant. 
c.  Apex Clearing 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.  Apex Clearing shall require that, within ninety (90) days of the date of 
the engagement letter, the Compliance Consultant conduct: 
i.  A comprehensive review of Apex Clearing’s supervisory, compliance, 
and other policies and procedures designed to ensure that Apex Clearing’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 Apex Clearing to 
ensure personnel are complying with the requirements regarding the preservation 
of electronic communications, including those found on Personal Devices, in 

 6 
accordance with the requirements of the federal securities laws, including by 
ensuring that Apex Clearing 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 
Apex Clearing 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 Apex Clearing has 
begun implementing to meet the record retention requirements of the federal 
securities laws, including an assessment of the likelihood that Apex Clearing 
personnel will use the technological solutions going forward and a review of the 
measures employed by Apex Clearing to track employee usage of new 
technological solutions. 
v.  An assessment of the measures used by Apex Clearing 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 
Apex Clearing’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 Apex Clearing’s electronic communications surveillance 
routines to ensure that electronic communications through approved 
communications methods found on Personal Devices are incorporated into Apex 
Clearing’s overall communications surveillance program. 
vii.  A comprehensive review of the framework adopted by Apex Clearing 
to address instances of non-compliance by Apex Clearing employees with Apex 
Clearing’s policies and procedures concerning the use of Personal Devices to 
communicate about Apex Clearing business in the past.  This review shall include 
a survey of how Apex Clearing determined which employees failed to comply 
with Apex Clearing 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.  Apex Clearing shall require that, within forty-five (45) days after completion of 
the review set forth in sub-paragraphs c.i. through c.vii. above, the Compliance Consultant 
shall submit a detailed written report of its findings to Apex Clearing and to the 
Commission staff (the “Report”).  Apex Clearing 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 Apex Clearing’s policies and procedures, and a summary of 

 7 
the plan for implementing the recommended changes in or improvements to Apex 
Clearing’s policies and procedures. 
e.  Apex Clearing 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, Apex Clearing shall advise the Compliance Consultant 
and the Commission staff in writing of any recommendations that Apex Clearing considers 
to be unduly burdensome, impractical, or inappropriate.  With respect to any 
recommendation that Apex Clearing considers unduly burdensome, impractical, or 
inappropriate, Apex Clearing need not adopt such recommendation 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 Apex Clearing’s policies or procedures 
on which Apex Clearing and the Compliance Consultant do not agree, Apex Clearing 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 Apex Clearing and the Compliance Consultant, Apex 
Clearing shall require that the Compliance Consultant inform Apex Clearing and the 
Commission staff in writing of the Compliance Consultant’s final determination 
concerning any recommendation that Apex Clearing considers to be unduly burdensome, 
impractical, or inappropriate.  Apex Clearing shall abide by the determinations of the 
Compliance Consultant and, within sixty (60) days after final agreement between Apex 
Clearing and the Compliance Consultant or final determination by the Compliance 
Consultant, whichever occurs first, Apex Clearing shall adopt and implement all of the 
recommendations that the Compliance Consultant deems appropriate. 
g.  Apex Clearing shall cooperate fully with the Compliance Consultant and shall 
provide the Compliance Consultant with access to such of Apex Clearing’s files, books, 
records, and personnel as are reasonably requested by the Compliance Consultant for 
review. 
h.  Apex Clearing 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.  Apex Clearing 
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, Respondent 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 

 8 
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 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. 
28. One-Year Evaluation.  Apex Clearing shall require the Compliance Consultant to 
assess Apex Clearing’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 27.d above.  Apex Clearing shall require this 
review to evaluate Apex Clearing’s progress in the areas described in Paragraph 27.c.i-vii above.  
After this review, Apex Clearing shall require the Compliance Consultant to submit a report (the 
“One Year Report”) to Apex Clearing and the Commission staff and shall ensure that the One Year 
Report includes an updated assessment of Apex Clearing’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. 
29. Reporting Discipline Imposed.  For two years following the entry of this Order, 
Apex Clearing shall notify the Commission staff as follows upon the imposition of any discipline 
imposed by Apex Clearing, 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 Apex Clearing’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. 
30. Recordkeeping.  Apex Clearing shall 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. 
31. 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. 
32. Certification.  Apex Clearing shall 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 
evidence of compliance, and Respondent agrees to provide such evidence.  The certification and 

 9 
supporting material shall be submitted to Scott A. Thompson, Associate Regional Director, 
Securities and Exchange Commission, 1617 JFK Blvd., Suite 520, Philadelphia, PA 19130, 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 Respondent’s Offer. 
 
 Accordingly, pursuant to Sections 15(b) and 21C of the Exchange Act, it is hereby 
ORDERED that: 
 
 A. Respondent 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 shall comply with the undertakings enumerated in paragraphs 26 to 32 
above. 
 
D. Respondent shall, within 14 days of the entry of this Order, pay a civil money 
penalty in the amount of $6,000,000 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) Respondent may transmit payment electronically to the Commission, which 
will provide detailed ACH transfer/Fedwire instructions upon request;  
 
(2) Respondent 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) Respondent 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:  
 
Enterprise Services Center 
Accounts Receivable Branch 
HQ Bldg., Room 181, AMZ-341 
6500 South MacArthur Boulevard 
Oklahoma City, OK 73169 
 

 10 
Payments by check or money order must be accompanied by a cover letter identifying 
Apex Clearing as the Respondent 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 Scott A. Thompson, Associate 
Regional Director, Securities and Exchange Commission, 1617 JFK Blvd., Suite 520, Philadelphia, 
PA 19130.   
 
 E. 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, Respondent agrees that in any Related Investor 
Action, it shall not argue that it is entitled to, nor shall it benefit by, offset or reduction of any 
award of compensatory damages by the amount of any part of Respondent’s payment of a civil 
penalty in this action (“Penalty Offset”).  If the court in any Related Investor Action grants such a 
Penalty Offset, Respondent agrees that it 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 Respondent 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. 100702 / August 14, 2024 

 

ADMINISTRATIVE PROCEEDING 

File No. 3-21998 

 

 

In the Matter of 

 

Apex Clearing Corporation,  

 

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 Apex Clearing Corporation (“Respondent” or “Apex Clearing”). 

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. 

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 

 
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. 

 



 2 

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 the widespread failure of Apex Clearing employees 

throughout the firm, including at senior levels, to adhere to certain of these essential requirements 

and Apex Clearing’s own policies.  Using their personal devices, these employees communicated 

both internally and externally by personal text messages (“off-channel communications”). 

3. From at least January 2021, Apex Clearing employees sent and received off-

channel communications that related to the business of the broker-dealer operated by Apex 

Clearing.  Respondent did not maintain or preserve the substantial majority of these written 

communications.  Respondent’s failure was firm-wide and involved employees at various levels of 

authority.  As a result, Apex Clearing violated Section 17(a) of the Exchange Act and Rule 17a-

4(b)(4) thereunder.  

4. Apex Clearing’s supervisors, who were responsible for supervising junior 

employees, communicated off-channel using their personal devices.  In fact, senior officers and 

supervisors responsible for supervising junior employees themselves failed to comply with Apex 

Clearing’s policies by communicating using non-firm approved methods on their personal devices 

about Apex Clearing’s broker-dealer business. 

5. Apex Clearing’s widespread failure to implement its policies and procedures that 

prohibit such communications led to its failure to reasonably supervise its employees within the 

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

6. Apex Clearing has initiated a review of its recordkeeping failures and begun a 

program of remediation.  As set forth in the Undertakings below, Apex Clearing will retain an 

independent compliance consultant to review and assess Apex Clearing’s remedial steps relating to 

its recordkeeping practices, policies and procedures, related supervisory practices, and employment 

actions. 

Respondent 

7. Apex Clearing Corporation is a New York corporation with its principal office in 

Dallas, Texas, and is registered with the Commission as a broker-dealer. 

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.  This rule specifies the manner and length of time that the records created in accordance 



 3 

with Commission rules, and certain other records produced 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 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). 

Apex Clearing’s Policies and Procedures 

12. Apex Clearing 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. Apex Clearing 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 unapproved applications on their personal devices. 

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

subject to review, and archived.  Messages sent through unapproved communications methods, 

such as iMessage and SMS messages on personal devices, were not monitored, subject to review, 

or archived. 

15. Apex Clearing’s policies were designed to address supervisors’ supervision of 

employees’ training in the firm’s communications policies and adherence to the firm’s books and 

recordkeeping requirements.  Supervisory policies notified employees that electronic 

communications were subject to surveillance by Apex Clearing.  Apex Clearing had procedures for 

all employees, including supervisors, requiring annual self-attestations of compliance. 

16. Apex Clearing, however, failed to implement a system of follow-up and review to 

determine that supervisors were reasonably following Apex Clearing’s policies.  While permitting 

employees to use approved communications methods, including on personal phones, for business 

communications, Apex Clearing failed to implement sufficient monitoring to ensure that its 

recordkeeping and communications policies were being followed. 



 4 

Apex Clearing’s Recordkeeping Failures Across Its Brokerage Business 

17. In 2023, the Commission staff commenced an investigation related to whether 

Apex Clearing was properly retaining business-related messages sent and received on personal 

devices.  Apex Clearing cooperated with the investigation by voluntarily interviewing a sampling 

of senior personnel and gathering and reviewing messages found on the individuals’ personal 

devices.  These personnel included certain members of senior leadership.   

18. The Commission staff’s investigation uncovered off-channel communications at 

various seniority levels of Apex Clearing.  The investigation determined that all broker-dealer 

personnel sampled had engaged in at least some level of off-channel communications.  Overall, 

these personnel sent and received numerous off-channel communications, involving other Apex 

Clearing personnel and other participants in the securities industry.  Within Apex Clearing, senior 

leadership participated in off-channel communications. 

19. From at least January 2021, Apex Clearing personnel sent and received off-channel 

messages that concerned the broker-dealer’s business. 

20. For example, from January 2021 through December 2021, a senior officer at Apex 

Clearing exchanged numerous business-related off-channel messages with at least 32 Apex 

Clearing colleagues and four external contacts in the securities industry.  Within Apex Clearing, 

this senior officer communicated with junior employees under their supervision.  These messages 

related to the broker-dealer’s business as such. 

21. In addition, from January 2021 through December 2021, a department head of 

Apex Clearing exchanged numerous business-related off-channel messages with at least 46 Apex 

Clearing colleagues and 21 external contacts in the securities industry.  Within Apex Clearing, this 

department head communicated with junior employees under their supervision.  These messages 

related to the broker-dealer’s business as such. 

22. Also, from May 2021 through December 2021, another department head of Apex 

Clearing exchanged business-related off-channel messages with at least six Apex Clearing 

colleagues and 15 external contacts in the securities industry.  Within Apex Clearing, this 

department head communicated with junior employees under their supervision.  These messages 

related to the broker-dealer’s business as such. 

Apex Clearing’s Violations and Failure to Supervise 

23. As a result of the conduct described above, from at least January 2021 through the 

date of this Order, Apex Clearing willfully2 violated Section 17(a) of the Exchange Act and Rule 

17a-4(b)(4) thereunder, which require broker-dealers to preserve for at least three years originals 

 
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)).  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). 



 5 

of all communications received and copies of all communications sent relating to their business 

as such. 

24. As a result of the conduct described above, Apex Clearing failed reasonably to 

supervise its employees with a view to preventing or detecting certain of its 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. 

Apex Clearing’s Remedial Efforts 

25. In determining to accept the Offer, the Commission considered cooperation 

afforded the Commission staff and steps promptly undertaken by Apex Clearing prior to and 

after being approached by the Commission staff, including a firm-wide lookback effort to 

collect, image, review, and archive all business-related off-channel communications on 

employee personal devices. 

Undertakings 

26. Prior to this action, Apex Clearing enhanced its 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, Apex Clearing has undertaken to: 

27. Independent Compliance Consultant. 

a.  Apex Clearing shall 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 Apex Clearing. 

b.  Apex Clearing will oversee the work of the Compliance Consultant. 

c.  Apex Clearing 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.  Apex Clearing shall require that, within ninety (90) days of the date of 

the engagement letter, the Compliance Consultant conduct: 

i.  A comprehensive review of Apex Clearing’s supervisory, compliance, 

and other policies and procedures designed to ensure that Apex Clearing’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 Apex Clearing to 

ensure personnel are complying with the requirements regarding the preservation 

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



 6 

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

ensuring that Apex Clearing 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 

Apex Clearing 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 Apex Clearing has 

begun implementing to meet the record retention requirements of the federal 

securities laws, including an assessment of the likelihood that Apex Clearing 

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

measures employed by Apex Clearing to track employee usage of new 

technological solutions. 

v.  An assessment of the measures used by Apex Clearing 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 

Apex Clearing’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 Apex Clearing’s electronic communications surveillance 

routines to ensure that electronic communications through approved 

communications methods found on Personal Devices are incorporated into Apex 

Clearing’s overall communications surveillance program. 

vii.  A comprehensive review of the framework adopted by Apex Clearing 

to address instances of non-compliance by Apex Clearing employees with Apex 

Clearing’s policies and procedures concerning the use of Personal Devices to 

communicate about Apex Clearing business in the past.  This review shall include 

a survey of how Apex Clearing determined which employees failed to comply 

with Apex Clearing 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.  Apex Clearing shall require that, within forty-five (45) days after completion of 

the review set forth in sub-paragraphs c.i. through c.vii. above, the Compliance Consultant 

shall submit a detailed written report of its findings to Apex Clearing and to the 

Commission staff (the “Report”).  Apex Clearing 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 Apex Clearing’s policies and procedures, and a summary of 



 7 

the plan for implementing the recommended changes in or improvements to Apex 

Clearing’s policies and procedures. 

e.  Apex Clearing 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, Apex Clearing shall advise the Compliance Consultant 

and the Commission staff in writing of any recommendations that Apex Clearing considers 

to be unduly burdensome, impractical, or inappropriate.  With respect to any 

recommendation that Apex Clearing considers unduly burdensome, impractical, or 

inappropriate, Apex Clearing need not adopt such recommendation 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 Apex Clearing’s policies or procedures 

on which Apex Clearing and the Compliance Consultant do not agree, Apex Clearing 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 Apex Clearing and the Compliance Consultant, Apex 

Clearing shall require that the Compliance Consultant inform Apex Clearing and the 

Commission staff in writing of the Compliance Consultant’s final determination 

concerning any recommendation that Apex Clearing considers to be unduly burdensome, 

impractical, or inappropriate.  Apex Clearing shall abide by the determinations of the 

Compliance Consultant and, within sixty (60) days after final agreement between Apex 

Clearing and the Compliance Consultant or final determination by the Compliance 

Consultant, whichever occurs first, Apex Clearing shall adopt and implement all of the 

recommendations that the Compliance Consultant deems appropriate. 

g.  Apex Clearing shall cooperate fully with the Compliance Consultant and shall 

provide the Compliance Consultant with access to such of Apex Clearing’s files, books, 

records, and personnel as are reasonably requested by the Compliance Consultant for 

review. 

h.  Apex Clearing 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.  Apex Clearing 

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, Respondent 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 



 8 

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 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. 

28. One-Year Evaluation.  Apex Clearing shall require the Compliance Consultant to 

assess Apex Clearing’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 27.d above.  Apex Clearing shall require this 

review to evaluate Apex Clearing’s progress in the areas described in Paragraph 27.c.i-vii above.  

After this review, Apex Clearing shall require the Compliance Consultant to submit a report (the 

“One Year Report”) to Apex Clearing and the Commission staff and shall ensure that the One Year 

Report includes an updated assessment of Apex Clearing’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. 

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

Apex Clearing shall notify the Commission staff as follows upon the imposition of any discipline 

imposed by Apex Clearing, 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 Apex Clearing’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. 

30. Recordkeeping.  Apex Clearing shall 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. 

31. 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. 

32. Certification.  Apex Clearing shall 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 

evidence of compliance, and Respondent agrees to provide such evidence.  The certification and 



 9 

supporting material shall be submitted to Scott A. Thompson, Associate Regional Director, 

Securities and Exchange Commission, 1617 JFK Blvd., Suite 520, Philadelphia, PA 19130, 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 Respondent’s Offer. 

 

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

ORDERED that: 

 

 A. Respondent 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 shall comply with the undertakings enumerated in paragraphs 26 to 32 

above. 

 

D. Respondent shall, within 14 days of the entry of this Order, pay a civil money 

penalty in the amount of $6,000,000 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) Respondent may transmit payment electronically to the Commission, which 

will provide detailed ACH transfer/Fedwire instructions upon request;  

 

(2) Respondent 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) Respondent 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:  

 

Enterprise Services Center 

Accounts Receivable Branch 

HQ Bldg., Room 181, AMZ-341 

6500 South MacArthur Boulevard 

Oklahoma City, OK 73169 

 



 10 

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

Apex Clearing as the Respondent 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 Scott A. Thompson, Associate 

Regional Director, Securities and Exchange Commission, 1617 JFK Blvd., Suite 520, Philadelphia, 

PA 19130.   

 

 E. 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, Respondent agrees that in any Related Investor 

Action, it shall not argue that it is entitled to, nor shall it benefit by, offset or reduction of any 

award of compensatory damages by the amount of any part of Respondent’s payment of a civil 

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

Penalty Offset, Respondent agrees that it 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 Respondent 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