In re U.S. Bancorp Investments

 
UNITED STATES OF AMERICA 
 Before the 
 SECURITIES AND EXCHANGE COMMISSION 
 
SECURITIES EXCHANGE ACT OF 1934 
Release No. 99505 / February 9, 2024 
 
ADMINISTRATIVE PROCEEDING 
File No. 3-21854 
 
 
In the Matter of 
 
U.S. Bancorp Investments, 
Inc.,  
 
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 U.S. Bancorp Investments, Inc. (“Respondent” or “USBI”). 
 
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 and longstanding failure of USBI 
employees throughout USBI, including at senior levels, to adhere to certain of these essential 
requirements and USBI’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 2020, USBI employees sent and received off-channel 
communications that related to the business of the broker-dealer operated by USBI.  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, USBI violated Section 17(a) of the Exchange Act and Rule 17a-4(b)(4) thereunder. 
4. USBI’s supervisors, who were responsible for supervising junior employees, 
communicated off-channel using their personal devices.  In fact, a senior executive, senior vice 
presidents, and managing directors responsible for supervising junior employees themselves 
failed to comply with USBI’s policies by communicating using non-USBI approved methods on 
their personal devices about USBI’s broker-dealer business. 
5. USBI’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. During the time period that USBI failed to maintain and preserve off-channel 
communications its employees sent and received related to the broker-dealer’s business, USBI 
received and responded to Commission subpoenas for documents and records requests in 
numerous Commission investigations.  As a result, USBI’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. Commission staff uncovered USBI’s misconduct after commencing a risk-based 
initiative to investigate the use of off-channel and unpreserved communications at broker-
dealers.  USBI has initiated a review of its recordkeeping failures and begun a program of 
remediation.  As set forth in the Undertakings below, USBI will retain an independent 
compliance consultant to review and assess USBI’s remedial steps relating to its recordkeeping 
practices, policies and procedures, related supervisory practices, and employment actions. 
Respondent 
8. USBI is a Delaware corporation with its principal office in St. Paul, Minnesota, and 
is registered with the Commission as a broker-dealer and investment adviser.  

3 
Recordkeeping Requirements under the Exchange Act 
9. 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. 
10. The Commission adopted Rule 17a-4 pursuant to this authority.  Rule 17a-4 
specifies the manner and length of time that the records created in accordance with other 
Commission rules, and certain other records produced by broker-dealers, must be maintained and 
produced promptly to Commission representatives.  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). 
USBI’s    P
olicies and Procedures 
12. USBI 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. USBI 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, 
specifically iMessage and SMS messages on personal devices, were not monitored, subject to 
review, or archived. 
15. USBI policies were designed to address supervisors’ supervision of employees’ 
training in USBI’s communications policies and adherence to USBI’s books and recordkeeping 
requirements.  Supervisory policies notified employees that electronic communications were 
subject to surveillance by USBI.  USBI had procedures for all employees, including supervisors, 
requiring annual self-attestations of compliance.  

4 
16. USBI, however, failed to implement a system of follow-up and review to 
determine that supervisors were reasonably following USBI’s policies.  While permitting 
employees to use approved communications methods, including on personal phones, for business 
communications, USBI failed to implement sufficient monitoring to assure that its recordkeeping 
and communications policies were being followed.  
USBI’s Recordkeeping Failures Across Its Brokerage Business 
17. 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.  USBI 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 senior leadership, such as a senior 
executive, senior vice presidents, and managing directors.  
18. The Commission staff’s investigation uncovered pervasive off-channel 
communications at all seniority levels of USBI’s broker-dealer.  The investigation determined 
that nearly 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 USBI personnel, USBI broker-dealer customers, and other 
participants in the securities industry.  Within USBI, significant numbers of senior personnel 
participated in off-channel communications. 
19. From at least January 2020, USBI personnel sent and received off-channel 
messages that concerned the broker-dealer’s business. 
20. For example, a senior executive exchanged multiple off-channel business-related 
messages with at least three USBI colleagues, including a senior vice president and a senior 
leader. 
21. In addition, a managing director exchanged numerous off-channel business-
related messages with at least nine USBI colleagues, an individual at another financial services 
firm, and one customer.  Within USBI, the individual communicated with managing directors, a 
senior vice president, and junior employees under their supervision. 
22. Furthermore, a senior vice president exchanged numerous off-channel business-
related messages with at least six USBI colleagues, four individuals at another financial services 
firm, one of which was also a customer, and one other market participant.  Within USBI, the 
individual communicated with a managing director, a director, and junior employees under their 
supervision. 
USBI’s Failure to Preserve Required Records Potentially 
Compromised and Delayed Commission Matters 
23. Between January 2020 and October 2022, USBI received and responded to 
Commission subpoenas for documents and records requests in numerous Commission 
investigations.  By failing to maintain and preserve required records relating to its broker-dealer 

5 
business, USBI likely deprived the Commission of these off-channel communications in various 
investigations. 
USBI’s Violations and Failure to Supervise 
24. As a result of the conduct described above, from at least January 2020 through the 
date of this Order, Respondent 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 
of all communications received and copies of all communications sent relating to its business as 
such.   
25. As a result of the conduct described above, Respondent 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.  
USBI’s Remedial Efforts 
26. In determining to accept the Offer, the Commission considered steps promptly 
undertaken by USBI prior to and after being approached by Commission staff, and cooperation 
afforded the Commission staff. 
Undertakings 
27. Prior to this action, Respondent 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, Respondent has undertaken to: 
28. Independent Compliance Consultant. 
a.  USBI 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 USBI. 
 
b.  USBI will oversee the work of the Compliance Consultant. 
 
c.  USBI 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 
 
2
  “Willfully,” for purposes of imposing relief under Section 15(b) of the Exchange Act 
“‘means no more than that the person charged with the duty knows what he is doing.’”  
Wonsover v. SEC, 205 F.3d 408, 414 (D.C. Cir 2000) (quoting Hughes v. SEC, 174 F.2d 969, 
977 (D.C. Cir. 1949)).   

6 
below.  USBI shall require that, within ninety (90) days of the date of the engagement 
letter, the Compliance Consultant conduct: 
 
i.  A comprehensive review of USBI’s supervisory, compliance, and other 
policies and procedures designed to ensure that USBI’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 USBI 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 USBI 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 
USBI 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 USBI has begun 
implementing to meet the record retention requirements of the federal securities 
laws, including an assessment of the likelihood that USBI personnel will use the 
technological solutions going forward and a review of the measures employed by 
USBI to track employee usage of new technological solutions.  
 
v.  An assessment of the measures used by USBI 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 
USBI’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 USBI’s electronic communications surveillance routines 
to ensure that electronic communications through approved communications 
methods found on Personal Devices are incorporated into USBI’s overall 
communications surveillance program.   
 
vii.  A comprehensive review of the framework adopted by USBI to 
address instances of non-compliance by USBI employees with USBI’s policies 
and procedures concerning the use of Personal Devices to communicate about 
USBI business in the past.  This review shall include a survey of how USBI 
determined which employees failed to comply with USBI policies and 
procedures, the corrective action carried out, an evaluation of who violated 

7 
policies and why, what penalties were imposed, and whether penalties were 
handed out consistently across business lines and seniority levels.   
 
d.  USBI shall require that, within forty-five (45) days after completion of the 
review set forth in sub-paragraphs 28.c.i. through c.vii. above, the Compliance 
Consultant shall submit a detailed written report of its findings to USBI and to the 
Commission staff (the “Report”).  USBI 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 USBI’s policies and procedures, and a summary of the 
plan for implementing the recommended changes in or improvements to USBI’s policies 
and procedures. 
 
e.  USBI 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 Report, USBI shall advise the Compliance Consultant and the 
Commission staff in writing of any recommendations that USBI considers to be unduly 
burdensome, impractical, or inappropriate.  With respect to any recommendation that 
USBI considers unduly burdensome, impractical, or inappropriate, USBI 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 USBI’s policies or procedures on which 
USBI and the Compliance Consultant do not agree, USBI 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 USBI and the Compliance Consultant, USBI shall require that the Compliance 
Consultant inform USBI and the Commission staff in writing of the Compliance 
Consultant’s final determination concerning any recommendation that USBI considers to 
be unduly burdensome, impractical, or inappropriate.  USBI shall abide by the 
determinations of the Compliance Consultant and, within sixty (60) days after final 
agreement between USBI and the Compliance Consultant or final determination by the 
Compliance Consultant, whichever occurs first, USBI shall adopt and implement all of 
the recommendations that the Compliance Consultant deems appropriate. 
 
g.  USBI shall cooperate fully with the Compliance Consultant and shall provide 
the Compliance Consultant with access to such of USBI’s files, books, records, and 
personnel as are reasonably requested by the Compliance Consultant for review. 
 
h.  USBI 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.  USBI 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. 
 

8 
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 
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. 
 
29. One-Year Evaluation.  USBI shall require the Compliance Consultant to assess 
USBI’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 28.d above.  USBI shall require this review to 
evaluate USBI’s progress in the areas described in Paragraph 28.c.i-vii above.  After this review, 
USBI shall require the Compliance Consultant to submit a report (the “One Year Report”) to 
USBI and the Commission staff and shall ensure that the One Year Report includes an updated 
assessment of USBI’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.  
30. R
eporting Discipline Imposed.  For two years following the entry of this Order, 
USBI shall notify the Commission staff as follows upon the imposition of any discipline imposed 
by USBI, 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 USBI’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.   
31. In
ternal Audit.  In addition to the Compliance Consultant’s review and issuance of 
the One Year Report, USBI will also have its Internal Audit function conduct a separate audit(s) to 
assess USBI’s progress in the areas described in Paragraph 28.c.i-vii above.  After completion of 
this audit(s), USBI shall ensure that Internal Audit submits a report to USBI and to the 
Commission staff. 

9 
32. Recordkeeping.  USBI 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. 
33. 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. 
34. C
ertification.  USBI 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 supporting 
material shall be submitted to Alison R. Levine, Assistant Regional Director, Division of 
Enforcement, New York Regional Office, Securities and Exchange Commission, 100 Pearl 
Street, Suite 20-100, New York, NY, 10004-2616, 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 27 to 
34 above. 
  
 D. Respondent shall, within 14 days of the entry of this Order, pay a civil money 
penalty in the amount of $8,000,000 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;  
 

10 
(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 
 
Payments by check or money order must be accompanied by a cover letter identifying 
USBI as a 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 Thomas P. Smith, Jr., Associate 
Regional Director, Securities and Exchange Commission, 100 Pearl Street, Suite 20-100, New 
York, New York 10004-2616.   
 
 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. 99505 / February 9, 2024 
 
ADMINISTRATIVE PROCEEDING 
File No. 3-21854 
 
 
In the Matter of 
 

U.S. Bancorp Investments, 
Inc.,  

 
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 U.S. Bancorp Investments, Inc. (“Respondent” or “USBI”). 

 
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 and longstanding failure of USBI 
employees throughout USBI, including at senior levels, to adhere to certain of these essential 
requirements and USBI’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 2020, USBI employees sent and received off-channel 
communications that related to the business of the broker-dealer operated by USBI.  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, USBI violated Section 17(a) of the Exchange Act and Rule 17a-4(b)(4) thereunder. 

4. USBI’s supervisors, who were responsible for supervising junior employees, 
communicated off-channel using their personal devices.  In fact, a senior executive, senior vice 
presidents, and managing directors responsible for supervising junior employees themselves 
failed to comply with USBI’s policies by communicating using non-USBI approved methods on 
their personal devices about USBI’s broker-dealer business. 

5. USBI’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. During the time period that USBI failed to maintain and preserve off-channel 
communications its employees sent and received related to the broker-dealer’s business, USBI 
received and responded to Commission subpoenas for documents and records requests in 
numerous Commission investigations.  As a result, USBI’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. Commission staff uncovered USBI’s misconduct after commencing a risk-based 
initiative to investigate the use of off-channel and unpreserved communications at broker-
dealers.  USBI has initiated a review of its recordkeeping failures and begun a program of 
remediation.  As set forth in the Undertakings below, USBI will retain an independent 
compliance consultant to review and assess USBI’s remedial steps relating to its recordkeeping 
practices, policies and procedures, related supervisory practices, and employment actions. 

Respondent 

8. USBI is a Delaware corporation with its principal office in St. Paul, Minnesota, and 
is registered with the Commission as a broker-dealer and investment adviser.  



3 

Recordkeeping Requirements under the Exchange Act 

9. 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. 

10. The Commission adopted Rule 17a-4 pursuant to this authority.  Rule 17a-4 
specifies the manner and length of time that the records created in accordance with other 
Commission rules, and certain other records produced by broker-dealers, must be maintained and 
produced promptly to Commission representatives.  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). 

USBI’s Policies and Procedures 

12. USBI 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. USBI 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, 
specifically iMessage and SMS messages on personal devices, were not monitored, subject to 
review, or archived. 

15. USBI policies were designed to address supervisors’ supervision of employees’ 
training in USBI’s communications policies and adherence to USBI’s books and recordkeeping 
requirements.  Supervisory policies notified employees that electronic communications were 
subject to surveillance by USBI.  USBI had procedures for all employees, including supervisors, 
requiring annual self-attestations of compliance.  



4 

16. USBI, however, failed to implement a system of follow-up and review to 
determine that supervisors were reasonably following USBI’s policies.  While permitting 
employees to use approved communications methods, including on personal phones, for business 
communications, USBI failed to implement sufficient monitoring to assure that its recordkeeping 
and communications policies were being followed.  

USBI’s Recordkeeping Failures Across Its Brokerage Business 

17. 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.  USBI 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 senior leadership, such as a senior 
executive, senior vice presidents, and managing directors.  

18. The Commission staff’s investigation uncovered pervasive off-channel 
communications at all seniority levels of USBI’s broker-dealer.  The investigation determined 
that nearly 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 USBI personnel, USBI broker-dealer customers, and other 
participants in the securities industry.  Within USBI, significant numbers of senior personnel 
participated in off-channel communications. 

19. From at least January 2020, USBI personnel sent and received off-channel 
messages that concerned the broker-dealer’s business. 

20. For example, a senior executive exchanged multiple off-channel business-related 
messages with at least three USBI colleagues, including a senior vice president and a senior 
leader. 

21. In addition, a managing director exchanged numerous off-channel business-
related messages with at least nine USBI colleagues, an individual at another financial services 
firm, and one customer.  Within USBI, the individual communicated with managing directors, a 
senior vice president, and junior employees under their supervision. 

22. Furthermore, a senior vice president exchanged numerous off-channel business-
related messages with at least six USBI colleagues, four individuals at another financial services 
firm, one of which was also a customer, and one other market participant.  Within USBI, the 
individual communicated with a managing director, a director, and junior employees under their 
supervision. 

USBI’s Failure to Preserve Required Records Potentially 
Compromised and Delayed Commission Matters 

23. Between January 2020 and October 2022, USBI received and responded to 
Commission subpoenas for documents and records requests in numerous Commission 
investigations.  By failing to maintain and preserve required records relating to its broker-dealer 



5 

business, USBI likely deprived the Commission of these off-channel communications in various 
investigations. 

USBI’s Violations and Failure to Supervise 

24. As a result of the conduct described above, from at least January 2020 through the 
date of this Order, Respondent 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 
of all communications received and copies of all communications sent relating to its business as 
such.   

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

USBI’s Remedial Efforts 

26. In determining to accept the Offer, the Commission considered steps promptly 
undertaken by USBI prior to and after being approached by Commission staff, and cooperation 
afforded the Commission staff. 

Undertakings 

27. Prior to this action, Respondent 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, Respondent has undertaken to: 

28. Independent Compliance Consultant. 

a.  USBI 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 USBI. 

 
b.  USBI will oversee the work of the Compliance Consultant. 
 
c.  USBI 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 

 
2  “Willfully,” for purposes of imposing relief under Section 15(b) of the Exchange Act 
“‘means no more than that the person charged with the duty knows what he is doing.’”  
Wonsover v. SEC, 205 F.3d 408, 414 (D.C. Cir 2000) (quoting Hughes v. SEC, 174 F.2d 969, 
977 (D.C. Cir. 1949)).   



6 

below.  USBI shall require that, within ninety (90) days of the date of the engagement 
letter, the Compliance Consultant conduct: 

 
i.  A comprehensive review of USBI’s supervisory, compliance, and other 

policies and procedures designed to ensure that USBI’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 USBI 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 USBI 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 

USBI 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 USBI has begun 

implementing to meet the record retention requirements of the federal securities 
laws, including an assessment of the likelihood that USBI personnel will use the 
technological solutions going forward and a review of the measures employed by 
USBI to track employee usage of new technological solutions.  

 
v.  An assessment of the measures used by USBI 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 
USBI’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 USBI’s electronic communications surveillance routines 

to ensure that electronic communications through approved communications 
methods found on Personal Devices are incorporated into USBI’s overall 
communications surveillance program.   

 
vii.  A comprehensive review of the framework adopted by USBI to 

address instances of non-compliance by USBI employees with USBI’s policies 
and procedures concerning the use of Personal Devices to communicate about 
USBI business in the past.  This review shall include a survey of how USBI 
determined which employees failed to comply with USBI policies and 
procedures, the corrective action carried out, an evaluation of who violated 



7 

policies and why, what penalties were imposed, and whether penalties were 
handed out consistently across business lines and seniority levels.   

 
d.  USBI shall require that, within forty-five (45) days after completion of the 

review set forth in sub-paragraphs 28.c.i. through c.vii. above, the Compliance 
Consultant shall submit a detailed written report of its findings to USBI and to the 
Commission staff (the “Report”).  USBI 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 USBI’s policies and procedures, and a summary of the 
plan for implementing the recommended changes in or improvements to USBI’s policies 
and procedures. 

 
e.  USBI 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 Report, USBI shall advise the Compliance Consultant and the 
Commission staff in writing of any recommendations that USBI considers to be unduly 
burdensome, impractical, or inappropriate.  With respect to any recommendation that 
USBI considers unduly burdensome, impractical, or inappropriate, USBI 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 USBI’s policies or procedures on which 

USBI and the Compliance Consultant do not agree, USBI 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 USBI and the Compliance Consultant, USBI shall require that the Compliance 
Consultant inform USBI and the Commission staff in writing of the Compliance 
Consultant’s final determination concerning any recommendation that USBI considers to 
be unduly burdensome, impractical, or inappropriate.  USBI shall abide by the 
determinations of the Compliance Consultant and, within sixty (60) days after final 
agreement between USBI and the Compliance Consultant or final determination by the 
Compliance Consultant, whichever occurs first, USBI shall adopt and implement all of 
the recommendations that the Compliance Consultant deems appropriate. 

 
g.  USBI shall cooperate fully with the Compliance Consultant and shall provide 

the Compliance Consultant with access to such of USBI’s files, books, records, and 
personnel as are reasonably requested by the Compliance Consultant for review. 

 
h.  USBI 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.  USBI 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. 

 



8 

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 
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. 

 
29. One-Year Evaluation.  USBI shall require the Compliance Consultant to assess 

USBI’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 28.d above.  USBI shall require this review to 
evaluate USBI’s progress in the areas described in Paragraph 28.c.i-vii above.  After this review, 
USBI shall require the Compliance Consultant to submit a report (the “One Year Report”) to 
USBI and the Commission staff and shall ensure that the One Year Report includes an updated 
assessment of USBI’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.  

30. Reporting Discipline Imposed.  For two years following the entry of this Order, 
USBI shall notify the Commission staff as follows upon the imposition of any discipline imposed 
by USBI, 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 USBI’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.   

31. Internal Audit.  In addition to the Compliance Consultant’s review and issuance of 
the One Year Report, USBI will also have its Internal Audit function conduct a separate audit(s) to 
assess USBI’s progress in the areas described in Paragraph 28.c.i-vii above.  After completion of 
this audit(s), USBI shall ensure that Internal Audit submits a report to USBI and to the 
Commission staff. 



9 

32. Recordkeeping.  USBI 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. 

33. 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. 

34. Certification.  USBI 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 supporting 
material shall be submitted to Alison R. Levine, Assistant Regional Director, Division of 
Enforcement, New York Regional Office, Securities and Exchange Commission, 100 Pearl 
Street, Suite 20-100, New York, NY, 10004-2616, 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 27 to 

34 above. 
  
 D. Respondent shall, within 14 days of the entry of this Order, pay a civil money 
penalty in the amount of $8,000,000 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;  

 



10 

(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 

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

USBI as a 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 Thomas P. Smith, Jr., Associate 
Regional Director, Securities and Exchange Commission, 100 Pearl Street, Suite 20-100, New 
York, New York 10004-2616.   
 
 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
	In the Matter of
	Respondent.
	I.
	II.
	III.
	Summary
	Respondent
	Recordkeeping Requirements under the Exchange Act
	USBI’s Policies and Procedures
	USBI’s Recordkeeping Failures Across Its Brokerage Business
	17. 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.  USBI cooperated with the investigation by vol...
	USBI’s Failure to Preserve Required Records Potentially Compromised and Delayed Commission Matters
	USBI’s Violations and Failure to Supervise
	USBI’s Remedial Efforts
	Undertakings

	IV.