GWFS SEC share regulations reached

GWFS Equities, Inc., is a registered brokerage firm headquartered in Greenwood, Colorado, and a subsidiary of Great-Western Life & Annuity Company (“Great Western”). “GWFS ‘core business is the execution of transactions on behalf of…[the insurance company’s] clients of employer sponsored pension plans. “According to the administrative procedure of May 12, 2021 introduced by the United States Securities and Exchange Commission (” SEC “), Great Western’s business” is primarily focused on the retirement services market, with an emphasis on defined contribution plans, including plans commonly referred to as ‘401 (k)’ and ‘403 (b)’ plans. Great Western is the “second largest provider of retirement services, with approximately 9.4 million member accounts holding over $ 700 billion in assets.”

Broker / dealer affiliated with an insurer

On Monday, March 29, 2021, the SEC’s Examinations Division issued a risk alert on “Compliance issues with monitoring and reporting suspicious activity at broker-dealers,” which I discussed at length in my April 20, 2021 blog post, “Red Flags and DAS: SEC Warns Brokers / Dealers on Combating Money Laundering.” Now the proverbial chicken has come home to roost. On Wednesday, May 12, 2021, the SEC settled charges against GWFS for failing to file Suspicious Activity Reports (“SARs”). The SEC alleged, and GWFS acknowledged, that from September 2015 to October 2018, GWFS was aware that external and unauthorized entities were increasingly attempting to gain access to the retirement accounts of members of individual pension plans.

The SEC alleged that “GWFS was aware that the bad actors attempted or obtained access, among other things, by using personal identifying information improperly obtained on plan participants, and that the bad actors were frequently in. possession of electronic login information such as user names. , email addresses and passwords. The SEC enforcement action found that GWFS had failed to file approximately 130 expense claims, including in situations where GWFS knew that third parties had attempted or had in fact gained access to the retirement accounts of GWFS. plan members. In addition, for the approximately 297 SARs filed by GWFS, it did not include enough information to answer the who, what, when, where and why questions, nor the data it had, such as URLs and addresses. IP addresses, making the reports less than useful.

Restoration of pension plans

In the SEC’s May 12, 2021 administrative proceeding against GWFS, the SEC notes that several pension plan participants had access to their accounts, including:

  • Unauthorized withdrawal of $ 128,000 from a plan member, using a phone number that has been used to support at least two other accounts

  • A plan member received a check for $ 43,000 that he did not request because his personal information was changed using an IP address that GWFS identified as part of another take. account control; GWFS determined that nine plan member accounts were accessible in the same way

  • In October 2016, another plan member was the victim of two unauthorized withdrawals totaling $ 250,000; GWFS determined that the plan member’s account was taken over using a bank account associated with the takeover of another plan member

  • Another plan member in August 2016 was the victim of multiple withdrawals totaling over $ 400,000 using a phone number that GWFS identified as associated with other recent fraud attempts, through which GWFS learned the name of the plan. author.

Despite these details, GWFS has filed generic (“master key”) SARs on incidents, making virtually no effort to protect plan members and their accounts.

Too many worries

Faced with these facts, the SEC determined that GWFS had willfully violated its obligations under Section 17 (a) of the Securities Exchange Act of 1934, as amended and rule 17a-8 enacted thereunder. . The SEC administrative proceedings noted the “corrective actions promptly undertaken by …[GWFS] and the cooperation offered to Commission staff. The procedure reports that GWFS “has taken important corrective actions, including implementing new SAR drafting procedures: retaining an external AML consulting firm…, increasing both the size and experience of its SAR team. AML compliance; restructure its AML process…, implement new SAR policies, procedures, standards and training, and implement a new case management system… ”GWFS also conducted a“ comprehensive investigation of its SAR program. LBC ”and“ identified numerous transactions for which no SAR had been filed.

As a result, GWFS was ordered to cease and desist from violating rule 17a-8 and was censored. In addition, he was ordered to pay a civil fine of $ 1,500,000. This underlines that there are consequences of not taking legal responsibilities seriously. It wasn’t that GWFS was a “bad actor”; he just couldn’t be bothered to take the time and trouble to comply with the law, in the context of KNOWN exploitation of his systems AND losses by plan participants (suspected, invented by Great Western) . As Edmund Burke said in his address to voters in Bristol:

All that is needed for the forces of evil to win in this world is for enough good men to do nothing.

If you are involved in financial transactions, please be aware that the laws and regulations relating to the fight against money laundering and the financing of terrorism are becoming more and more stringent and more and more extensive in the digital age, as even a pipeline of petroleum products is not safe.

© 2021 Norris McLaughlin PA, All rights reservedNational Law Review, Volume XI, Number 140

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