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Guggenheim censured for prohibiting employees from contacting regulators

Guggenheim Securities has been censured by the US Securities and Exchange Commission for prohibiting employees from contacting regulators without approval.

The SEC said on Wednesday that the investment bank’s policy — included in a manual for employees and in annual training sessions — was a violation of whistleblower rules introduced in the aftermath of the 2008 financial crisis.

Between 2016 and 2020, the manual stated: “Employees are also strictly prohibited from initiating contact with any regulator without prior approval from the legal or compliance department. This prohibition applies to any subject matter that might be discussed with a regulator . . .” Violation of the policy carried a threat of disciplinary action.

The SEC added that it was unaware of any specific case where an employee was actively blocked from communicating with regulators. 

Guggenheim has agreed to revise the language in its compliance manual and paid a $208,912 penalty as a part of the settlement with the regulator.

“We are pleased to resolve the matter,” the bank said. “Guggenheim has always sought to protect whistleblower rights, and we note that the SEC acknowledged in this settlement that there was no evidence that the firm impeded whistleblower communications, if any,” Guggenheim said in a statement. 

The order does not pertain to sister company Guggenheim Partners Investment Management, which came under SEC investigation after a whistleblower complaint in 2016 accused the firm of self-dealing by putting its interests ahead of clients. The case was later closed without any enforcement actions against the company.

Under the leadership of veteran dealmaker Alan Schwartz, a former Bear Stearns banker, Guggenheim Securities has become one of the most influential merger and acquisition advisers in the US. 

Following the financial crisis it attracted several top bankers from larger institutions that were becoming more heavily regulated, a move that allowed it to win market share from more established rivals.

By paying large bonuses, Guggenheim was able to hire bankers who had established relations with some of the biggest companies in America, helping the firm win advisory roles on several mega deals, including Walt Disney’s $89bn acquisition of 21st Century Fox marquee assets and Charter’s $87.4bn takeover of Time Warner Cable.


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