In re Hilltop Securities Inc.

 
 
UNITED STATES OF AMERICA 
 Before the 
 SECURITIES AND EXCHANGE COMMISSION 
 
SECURITIES EXCHANGE ACT OF 1934 
Release No. 100697 / August 14, 2024 
 
INVESTMENT ADVISERS ACT OF 1940 
Release No. 6648 / August 14, 2024 
 
ADMINISTRATIVE PROCEEDING 
File No. 3-21993 
 
 
In the Matter of 
 
Hilltop Securities Inc.,  
 
Respondent. 
 
ORDER INSTITUTING ADMINISTRATIVE 
AND CEASE-AND-DESIST PROCEEDINGS 
PURSUANT TO SECTIONS 15(b) AND 21C 
OF THE SECURITIES EXCHANGE ACT OF 
1934 AND SECTIONS 203(e) AND 203(k) OF 
THE INVESTMENT ADVISERS ACT OF 
1940, MAKING FINDINGS, AND IMPOSING 
REMEDIAL SANCTIONS AND A CEASE-
AND-DESIST ORDER 
 
I. 
 The Securities and Exchange Commission (“Commission”) deems it appropriate and in 
the public interest that public administrative and cease-and-desist proceedings be, and hereby 
are, instituted pursuant to Sections 15(b) and 21C of the Securities Exchange Act of 1934 
(“Exchange Act”) and Sections 203(e) and 203(k) of the Investment Advisers Act of 1940 
(“Advisers Act”) against Hilltop Securities Inc. (“Respondent” or “HTS”). 
 
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 this proceeding, 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 and Sections 203(e) 
and 203(k) of the Investment Advisers Act of 1940, Making Findings, and Imposing Remedial 
Sanctions and a Cease-and-Desist Order (“Order”), as set forth below.   
 

 
 
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III. 
 On the basis of this Order and Respondent’s Offer, the Commission finds
1
 that: 
 
Summary 
1. The federal securities laws impose recordkeeping requirements on broker-dealers 
and registered investment advisers to ensure that they responsibly discharge their crucial role in 
our markets. The Commission has long said that compliance with these requirements is essential 
to investor protection and the Commission’s efforts to further its mandate of protecting investors, 
maintaining fair, orderly, and efficient markets, and facilitating capital formation.  
2. These proceedings arise out of HTS’s identification—and self-report—of 
widespread failures of certain HTS personnel, including at senior levels, to adhere to certain of 
these essential requirements and Respondent’s own policies. Using their personal devices, these 
personnel communicated both internally and externally by text messages, which were not an 
approved written communications platform (“off-channel communications”). 
3. After HTS’s compliance staff identified business-related electronic 
communications on a non-approved platform on personal devices, HTS conducted an internal 
investigation and self-reported the facts to Commission staff. Respondent proactively identified 
key documents and facts, which assisted the Commission staff in efficiently investigating the 
conduct. Prior to contacting the Division of Enforcement, Respondent also undertook significant 
remedial measures relating to its recordkeeping practices, policies and procedures, and related 
supervisory practices. 
4. From at least August 2019, HTS personnel sent and received off-channel 
communications that were records required to be maintained under Exchange Act Rule 17a-
4(b)(4) related to HTS’s broker-dealer business and with respect to HTS’s investment advisory 
business, off-channel communications that were required to be maintained under Advisers Act 
Rule 204-2(a)(7) related to recommendations made or proposed to be made and advice given or 
proposed to be given. Respondent did not maintain or preserve the substantial majority of these 
written communications. Respondent’s failures were firm-wide and involved personnel at 
various levels of authority. As a result, HTS violated Section 17(a) of the Exchange Act and Rule 
17a-4(b)(4) thereunder, and Section 204 of the Advisers Act and Rule 204-2(a)(7) thereunder. 
5. HTS’s supervisors, who were responsible for supervising junior personnel, 
routinely communicated off-channel using their personal devices. In fact, senior managers and 
officers responsible for supervising junior personnel themselves failed to comply with 
Respondent’s policies by communicating using non-HTS approved methods on their personal 
devices about HTS’s broker-dealer and investment adviser businesses.  
6. Respondent’s widespread failure to implement a system reasonably expected to 
determine whether personnel were following its policies and procedures that prohibit such off-
 
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.  

 
 
3 
channel communications led to its failure to reasonably supervise its personnel within the 
meaning of Section 15(b)(4)(E) of the Exchange Act and Section 203(e)(6) of the Advisers Act.  
7. During the time period that HTS failed to maintain and preserve off-channel 
communications that its personnel sent and received related to the broker-dealer and investment 
adviser businesses, HTS received and responded to Commission subpoenas for documents and/or 
records requests in numerous Commission investigations. As a result, HTS’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.   
8. After HTS initiated a review of its recordkeeping efforts, HTS identified failures 
and self-reported its conduct, and further enhanced its ongoing programs of remediation. As set 
forth in the Undertakings below, HTS will retain an independent compliance consultant to 
review and assess HTS’s remedial steps relating to its recordkeeping practices, policies and 
procedures, related supervisory practices, and employment actions. 
Respondent 
9. Hilltop Securities Inc. is a Delaware corporation with its principal office in 
Dallas, Texas, and is registered with the Commission as a broker-dealer and investment adviser. 
It is a wholly owned subsidiary of Hilltop Securities Holdings, LLC, a Delaware limited liability 
company. 
Recordkeeping Requirements under the Exchange and Advisers Acts 
10. Section 17(a)(1) of the Exchange Act and Section 204 of the Advisers Act 
authorize the Commission to issue rules requiring, respectively, broker-dealers and investment 
advisers to make and keep for prescribed periods, and furnish copies of, such records as 
necessary or appropriate in the public interest, for the protection of investors or, with respect to 
the Exchange Act, otherwise in furtherance of the purposes of the Exchange Act. 
11. The Commission adopted Rule 17a-4 under the Exchange Act and Rule 204-2 
under the Advisers Act pursuant to this authority. These rules specify the manner and length of 
time that the records created in accordance with Commission rules, and certain other records 
produced by broker-dealers or investment advisers, must be maintained and produced promptly 
to Commission representatives.   
12. The rules adopted under Section 17(a)(1) of the Exchange Act, including Rule 
17a-4(b)(4), require that broker-dealers preserve in an easily accessible place, originals of all 
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.  
13. The Commission previously has stated that these and other recordkeeping 
requirements “are an integral part of the investor protection function of the Commission, and 
other securities regulators, in that the preserved records are the primary means of monitoring 
compliance with applicable securities laws, including antifraud provisions and financial 

 
 
4 
responsibility standards.” Commission Guidance to Broker-Dealers on the Use of Electronic 
Storage Media under the Electronic Signatures in Global and National Commerce Act of 2000 
with Respect to Rule 17a-4(f), 17 C.F.R. Part 241, Exchange Act Rel. No. 44238 (May 1, 2001). 
14. The rules adopted under Advisers Act Section 204, including Advisers Act Rule 
204-2(a)(7), require that investment advisers preserve in an easily accessible place originals of 
all communications received and copies of all written communications sent relating to, among 
other things: (a) any recommendation made or proposed to be made and any advice given or 
proposed to be given; (b) any receipt, disbursement or delivery of funds or securities; (c) the 
placing or execution of any order to purchase or sell any security; or (d) predecessor 
performance and the performance or rate of return of any or all managed accounts, portfolios, or 
securities recommendations. 
HTS’s Policies and Procedures 
15. HTS maintained certain policies and procedures designed to ensure the retention 
of business-related records, including electronic communications, in compliance with the 
relevant recordkeeping provisions.   
16. HTS personnel were advised that the use of unapproved electronic 
communications methods, including on their personal devices, was not permitted, and they 
should not use personal email, chats or text messaging applications for business purposes, or 
forward work-related communications to their personal devices. Starting in October 2019, HTS 
personnel were advised that they were required to use an approved on-channel platform for 
business-related communications on any personal device. In January 2021, HTS also made 
corporate mobile devices available to members of its Executive Committee. 
17. Messages sent through HTS-approved communications methods were monitored, 
subject to review, and, when appropriate, archived. Messages sent through unapproved 
communications methods, such as text messaging or, after 2019, unapproved applications on 
personal devices, were not monitored, subject to review or archived. 
18. HTS’s policies were designed to address supervisors’ supervision of personnel 
training in HTS’s communications policies and adherence to HTS’s books and recordkeeping 
requirements. Supervisory policies notified personnel that electronic communications were 
subject to surveillance by HTS. HTS also had procedures for all personnel, including 
supervisors, requiring annual self-attestations of compliance.  
19. HTS, however, failed to implement systems reasonably expected to determine that 
all personnel, including supervisors, were following HTS’s policies. While permitting personnel 
to use approved communications methods, including, after 2019, an approved platform on 
personal phones, for business communications, HTS failed to implement sufficient monitoring to 
ensure that its recordkeeping and communications policies were being followed.  

 
 
5 
HTS’s Recordkeeping Failures 
20. In September 2021, the Commission staff commenced a risk-based initiative to 
investigate whether broker-dealers were properly retaining business-related messages sent and 
received on personal devices. In March 2024, HTS voluntarily contacted the staff regarding 
certain off-channel communications that it had identified related to the business of HTS. HTS 
cooperated with the staff’s investigation by proactively gathering communications from the 
personal devices of its personnel and responding to the staff’s requests for additional information. 
As reported to the Commission staff, HTS personnel who had engaged in the use of off-channel 
communications included senior managers and officers across the firm. 
21. HTS alerted the Commission staff to numerous off-channel communications at 
various seniority levels of HTS’s broker-dealer and investment adviser businesses. Respondent 
collected data from a sampling of broker-dealer and investment adviser personnel at various 
seniority levels and found that most had engaged in at least some level of off-channel 
communications since August 2019.  Overall, these personnel sent and received numerous off-
channel communications, involving other HTS personnel and external contacts in the securities 
industry. As disclosed to the Commission staff, within HTS, a number of senior leaders 
participated in off-channel communications. 
22. From at least August 2019, HTS personnel sent and received off-channel 
communications that concerned the business of the broker-dealer.  
23. For example, from June to December 2022, a Hilltop department head exchanged 
text messages with a Hilltop managing director regarding the terms and pricing of certain 
transactions.  These messages related to HTS’s broker-dealer business as such. 
24. From at least August 2019, HTS investment adviser personnel sent and received 
off-channel communications subject to the record-keeping requirements of Advisers Act Rule 
204-2. 
25. For example, in October 2022, a Hilltop department head exchanged off-channel 
communications with a potential advisory client regarding a proposed roll-over investment. 
These messages related to, among other things, investment advice given or proposed to be given 
to an HTS investment advisory client.  
HTS’s Failure to Preserve Required Records Potentially 
Compromised and Delayed Commission Matters 
26. Between August 2019 and the present, HTS received and responded to 
Commission subpoenas for documents and/or records requests in numerous Commission 
investigations. By failing to maintain and preserve required records relating to its business, HTS 
likely deprived the Commission of off-channel communications in various investigations. 

 
 
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HTS’s Violations and Failure to Supervise 
27. As a result of the conduct described above, from at least August 2019 through the 
date of this Order, HTS willfully
2
 violated Section 17(a) of the Exchange Act and Rule 
17a-4(b)(4) thereunder.   
28. As a result of the conduct described above, from at least August 2019 through the 
date of this Order, HTS willfully violated Section 204 of the Advisers Act and Rule 204-2(a)(7) 
thereunder. 
29. As a result of the conduct described above, HTS failed reasonably to supervise its 
personnel with a view to preventing or detecting certain of its personnel’s 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.  
30. As a result of the conduct described above, HTS failed reasonably to supervise its 
personnel with a view to preventing or detecting certain of its personnel’s aiding and abetting 
violations of Section 204 of the Advisers Act and Rule 204-2(a)(7) thereunder, within the 
meaning of Section 203(e)(6) of the Advisers Act. 
HTS’s Remedial and Cooperation Efforts 
31. In determining to accept the Offer, the Commission considered HTS’s self-report, 
cooperation afforded to Commission staff, and remediation. After identifying off-channel 
communications, Respondent conducted an internal investigation and self-reported the facts to 
Commission staff. Prior to approaching Commission staff, since at least August 2019, HTS had 
begun a program of remediation, which included strengthening its policies and procedures by 
making investments in new technologies to improve surveillance and retention efforts; increasing 
the number of trainings and sending firm-wide reminders that emphasized the importance of 
complying with recordkeeping obligations; making an on-channel texting platform available in 
October 2019; and providing corporate mobile devices to its Executive Committee members in 
January 2021.  HTS also took proactive steps to collect and preserve off-channel communications. 
 
2
  “Willfully,” for purposes of imposing relief under Section 15(b) of the Exchange Act and 
Section 203(e) of the Advisers Act “‘means no more than that the person charged with the duty 
knows what he is doing.’” See Wonsover v. SEC, 205 F.3d 408, 414 (D.C. Cir 2000) (quoting 
Hughes v. SEC, 174 F.2d 969, 977 (D.C. Cir. 1949)).  There is no requirement that the actor 
“also be aware that he is violating one of the Rules or Acts.”  Tager v. SEC, 344 F.2d 5, 8 (2d 
Cir. 1965). The decision in The Robare Group, Ltd. v. SEC, which construed the term “willfully” 
for purposes of a differently structured statutory provision, does not alter that standard. 922 F.3d 
468, 478-79 (D.C. Cir. 2019) (setting forth the showing required to establish that a person has 
“willfully omit[ted]” material information from a required disclosure in violation of Section 207 
of the Advisers Act). 

 
 
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Undertakings 
32. Prior to this action, HTS 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 its personnel.  
In addition, HTS have undertaken to: 
33. Independent Compliance Consultant. 
a.  HTS 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 HTS. 
 
b.  HTS will oversee the work of the Compliance Consultant. 
 
c.  HTS 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. HTS shall require that, within ninety (90) days of the date of the engagement 
letter, the Compliance Consultant conduct: 
 
i.  A comprehensive review of HTS’s supervisory, compliance, and other 
policies and procedures designed to ensure that HTS’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 HTS 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 HTS 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 
HTS 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 HTS has begun 
implementing to meet the record retention requirements of the federal securities 
laws, including an assessment of the likelihood that HTS personnel will use the 
technological solutions going forward and a review of the measures employed by 
HTS to track personnel usage of new technological solutions.  
 

 
 
8 
v.  An assessment of the measures used by HTS to prevent the use of 
unauthorized communications methods for business communications by 
personnel. This assessment should include, but not be limited to, a review of 
HTS’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 HTS’s electronic communications surveillance routines to 
ensure that electronic communications through approved communications 
methods found on Personal Devices are incorporated into HTS’s overall 
communications surveillance program.   
 
vii.  A comprehensive review of the framework adopted by HTS to 
address instances of non-compliance by HTS personnel with HTS’s policies and 
procedures concerning the use of Personal Devices to communicate about HTS 
business in the past. This review shall include a survey of how HTS determined 
which personnel failed to comply with HTS’s policies and procedures, the 
corrective action carried out, an evaluation of who violated policies and why, 
what penalties were imposed, and whether penalties were handed out consistently 
across business lines and seniority levels.   
 
d.  HTS shall require that, within forty-five (45) days after completion of the 
review set forth in sub-paragraphs 33.c.i. through c.vii. above, the Compliance 
Consultant shall submit a detailed written report of its findings to HTS and to the 
Commission staff (the “Report”). HTS 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 HTS’s policies and procedures, and a summary of the plan for 
implementing the recommended changes in or improvements to HTS’s policies and 
procedures. 
 
e.  HTS 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, HTS shall advise the Compliance Consultant and the 
Commission staff in writing of any recommendations that HTS considers to be unduly 
burdensome, impractical, or inappropriate. With respect to any recommendation that HTS 
considers unduly burdensome, impractical, or inappropriate, HTS 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 HTS’s policies or procedures on which 
HTS and the Compliance Consultant do not agree, HTS 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 HTS and the Compliance Consultant, HTS shall require that the Compliance 

 
 
9 
Consultant inform HTS and the Commission staff in writing of the Compliance 
Consultant’s final determination concerning any recommendation that HTS considers to 
be unduly burdensome, impractical, or inappropriate. HTS shall abide by the 
determinations of the Compliance Consultant and, within sixty (60) days after final 
agreement between HTS and the Compliance Consultant or final determination by the 
Compliance Consultant, whichever occurs first, HTS shall adopt and implement all of the 
recommendations that the Compliance Consultant deems appropriate. 
 
g.  HTS shall cooperate fully with the Compliance Consultant and shall provide 
the Compliance Consultant with access to such of HTS’s files, books, records, and 
personnel as are reasonably requested by the Compliance Consultant for review. 
 
h. HTS 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.  HTS shall compensate the 
Compliance Consultant and persons engaged to assist the Compliance Consultant for 
services rendered under this Order at its reasonable and customary rates. 
 
i.  For the period of engagement and for a period of two years from completion of 
the engagement, HTS 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. 
 
34. One-Year Evaluation. HTS shall require the Compliance Consultant to assess 
HTS’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 33.d above. HTS shall require this review to 
evaluate HTS’s progress in the areas described in Paragraph 33.c.i through 33.c.vii above.  After 
this review, HTS shall require the Compliance Consultant to submit a report (the “One Year 
Report”) to HTS, and the Commission staff and shall ensure that the One Year Report includes 
an updated assessment of HTS’s policies and procedures with regard to the preservation of 

 
 
10 
electronic communications (including those found on Personal Devices), training, surveillance 
programs, and technological solutions implemented in the prior year period.  
35. Reporting Discipline Imposed.  For two years following the entry of this Order, 
HTS shall notify the Commission staff as follows upon the imposition of any discipline imposed 
by HTS, including, but not limited to, written warnings, loss of any pay, bonus, or incentive 
compensation, or the termination of employment, with respect to any personnel found to have 
violated HTS’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.   
36. Internal Audit.  In addition to the Compliance Consultant’s review and issuance of 
the One Year Report, HTS will also have its Internal Audit function conduct a separate audit(s) to 
assess HTS’s progress in the areas described in Paragraph 33.c.i through 33.c.vii above.  After 
completion of this audit(s), HTS shall ensure that Internal Audit submits a report to HTS and to the 
Commission staff. 
37. Recordkeeping.  HTS 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.   
 
38. 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. 
39. Certification.  HTS 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 certifications and supporting 
material shall be submitted to Amy S. Cotter, Assistant Regional Director, Division of 
Enforcement, Chicago Regional Office, 175 West Jackson Boulevard, Suite 1450, Chicago, Illinois 
60604, or such other person as the Commission staff may request, with a copy to the Office of 
Chief Counsel of the Enforcement Division, no later than sixty (60) days from the date of the 
completion of the undertakings. 
IV. 
 In view of the foregoing, the Commission deems it appropriate and in the public interest 
to impose the sanctions agreed to in Respondent’s Offer. 
 
 Accordingly, pursuant to Sections 15(b) and 21C of the Exchange Act and Sections 
203(e) and 203(k) of the Advisers 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. 

 
 
11 
B. Respondent cease and desist from committing or causing any violations and any 
future violations of Section 204 of the Advisers Act and Rule 204-2 thereunder. 
C. Respondent is censured.  
 
D. Respondent shall comply with the undertakings enumerated in paragraphs 33 to 
39 above. 
 
E. Respondent shall, within 14 days of the entry of this Order, pay a civil money 
penalty in the amount of $1,600,000 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 
 
Payments by check or money order must be accompanied by a cover letter identifying 
HTS as the Respondent in this proceeding, and the file number of this proceeding; a copy of the 
cover letter and check or money order must be sent to Amy S. Cotter, Assistant Regional 
Director, Division of Enforcement, Chicago Regional Office, 175 West Jackson Boulevard, Suite 
1450, Chicago, Illinois 60604.   
 
  
 
 
 
 
 

 
 
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F. Amounts ordered to be paid as civil money penalties pursuant to this Order shall 
be treated as penalties paid to the government for all purposes, including all tax purposes. To 
preserve the deterrent effect of the civil penalty, 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. 100697 / August 14, 2024 

 

INVESTMENT ADVISERS ACT OF 1940 

Release No. 6648 / August 14, 2024 

 

ADMINISTRATIVE PROCEEDING 

File No. 3-21993 

 

 

In the Matter of 

 

Hilltop Securities Inc.,  

 

Respondent. 

 

ORDER INSTITUTING ADMINISTRATIVE 

AND CEASE-AND-DESIST PROCEEDINGS 

PURSUANT TO SECTIONS 15(b) AND 21C 

OF THE SECURITIES EXCHANGE ACT OF 

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

THE INVESTMENT ADVISERS ACT OF 

1940, MAKING FINDINGS, AND IMPOSING 

REMEDIAL SANCTIONS AND A CEASE-

AND-DESIST ORDER 

 

I. 

 The Securities and Exchange Commission (“Commission”) deems it appropriate and in 

the public interest that public administrative and cease-and-desist proceedings be, and hereby 

are, instituted pursuant to Sections 15(b) and 21C of the Securities Exchange Act of 1934 

(“Exchange Act”) and Sections 203(e) and 203(k) of the Investment Advisers Act of 1940 

(“Advisers Act”) against Hilltop Securities Inc. (“Respondent” or “HTS”). 

 

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 this proceeding, 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 and Sections 203(e) 

and 203(k) of the Investment Advisers Act of 1940, Making Findings, and Imposing Remedial 

Sanctions and a Cease-and-Desist Order (“Order”), as set forth below.   

 



 

 

2 

III. 

 On the basis of this Order and Respondent’s Offer, the Commission finds1 that: 

 

Summary 

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

and registered investment advisers to ensure that they responsibly discharge their crucial role in 

our markets. The Commission has long said that compliance with these requirements is essential 

to investor protection and the Commission’s efforts to further its mandate of protecting investors, 

maintaining fair, orderly, and efficient markets, and facilitating capital formation.  

2. These proceedings arise out of HTS’s identification—and self-report—of 

widespread failures of certain HTS personnel, including at senior levels, to adhere to certain of 

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

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

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

3. After HTS’s compliance staff identified business-related electronic 

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

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

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

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

remedial measures relating to its recordkeeping practices, policies and procedures, and related 

supervisory practices. 

4. From at least August 2019, HTS personnel sent and received off-channel 

communications that were records required to be maintained under Exchange Act Rule 17a-

4(b)(4) related to HTS’s broker-dealer business and with respect to HTS’s investment advisory 

business, off-channel communications that were required to be maintained under Advisers Act 

Rule 204-2(a)(7) related to recommendations made or proposed to be made and advice given or 

proposed to be given. Respondent did not maintain or preserve the substantial majority of these 

written communications. Respondent’s failures were firm-wide and involved personnel at 

various levels of authority. As a result, HTS violated Section 17(a) of the Exchange Act and Rule 

17a-4(b)(4) thereunder, and Section 204 of the Advisers Act and Rule 204-2(a)(7) thereunder. 

5. HTS’s supervisors, who were responsible for supervising junior personnel, 

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

officers responsible for supervising junior personnel themselves failed to comply with 

Respondent’s policies by communicating using non-HTS approved methods on their personal 

devices about HTS’s broker-dealer and investment adviser businesses.  

6. Respondent’s widespread failure to implement a system reasonably expected to 

determine whether personnel were following its policies and procedures that prohibit such off-

 
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.  



 

 

3 

channel communications led to its failure to reasonably supervise its personnel within the 

meaning of Section 15(b)(4)(E) of the Exchange Act and Section 203(e)(6) of the Advisers Act.  

7. During the time period that HTS failed to maintain and preserve off-channel 

communications that its personnel sent and received related to the broker-dealer and investment 

adviser businesses, HTS received and responded to Commission subpoenas for documents and/or 

records requests in numerous Commission investigations. As a result, HTS’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.   

8. After HTS initiated a review of its recordkeeping efforts, HTS identified failures 

and self-reported its conduct, and further enhanced its ongoing programs of remediation. As set 

forth in the Undertakings below, HTS will retain an independent compliance consultant to 

review and assess HTS’s remedial steps relating to its recordkeeping practices, policies and 

procedures, related supervisory practices, and employment actions. 

Respondent 

9. Hilltop Securities Inc. is a Delaware corporation with its principal office in 

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

It is a wholly owned subsidiary of Hilltop Securities Holdings, LLC, a Delaware limited liability 

company. 

Recordkeeping Requirements under the Exchange and Advisers Acts 

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

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

advisers to make and keep for prescribed periods, and furnish copies of, such records as 

necessary or appropriate in the public interest, for the protection of investors or, with respect to 

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

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

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

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

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

to Commission representatives.   

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

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

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.  

13. The Commission previously has stated that these and other recordkeeping 

requirements “are an integral part of the investor protection function of the Commission, and 

other securities regulators, in that the preserved records are the primary means of monitoring 

compliance with applicable securities laws, including antifraud provisions and financial 



 

 

4 

responsibility standards.” Commission Guidance to Broker-Dealers on the Use of Electronic 

Storage Media under the Electronic Signatures in Global and National Commerce Act of 2000 

with Respect to Rule 17a-4(f), 17 C.F.R. Part 241, Exchange Act Rel. No. 44238 (May 1, 2001). 

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

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

all communications received and copies of all written communications sent relating to, among 

other things: (a) any recommendation made or proposed to be made and any advice given or 

proposed to be given; (b) any receipt, disbursement or delivery of funds or securities; (c) the 

placing or execution of any order to purchase or sell any security; or (d) predecessor 

performance and the performance or rate of return of any or all managed accounts, portfolios, or 

securities recommendations. 

HTS’s Policies and Procedures 

15. HTS maintained certain policies and procedures designed to ensure the retention 

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

relevant recordkeeping provisions.   

16. HTS personnel were advised that the use of unapproved electronic 

communications methods, including on their personal devices, was not permitted, and they 

should not use personal email, chats or text messaging applications for business purposes, or 

forward work-related communications to their personal devices. Starting in October 2019, HTS 

personnel were advised that they were required to use an approved on-channel platform for 

business-related communications on any personal device. In January 2021, HTS also made 

corporate mobile devices available to members of its Executive Committee. 

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

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

communications methods, such as text messaging or, after 2019, unapproved applications on 

personal devices, were not monitored, subject to review or archived. 

18. HTS’s policies were designed to address supervisors’ supervision of personnel 

training in HTS’s communications policies and adherence to HTS’s books and recordkeeping 

requirements. Supervisory policies notified personnel that electronic communications were 

subject to surveillance by HTS. HTS also had procedures for all personnel, including 

supervisors, requiring annual self-attestations of compliance.  

19. HTS, however, failed to implement systems reasonably expected to determine that 

all personnel, including supervisors, were following HTS’s policies. While permitting personnel 

to use approved communications methods, including, after 2019, an approved platform on 

personal phones, for business communications, HTS failed to implement sufficient monitoring to 

ensure that its recordkeeping and communications policies were being followed.  



 

 

5 

HTS’s Recordkeeping Failures 

20. In September 2021, the Commission staff commenced a risk-based initiative to 

investigate whether broker-dealers were properly retaining business-related messages sent and 

received on personal devices. In March 2024, HTS voluntarily contacted the staff regarding 

certain off-channel communications that it had identified related to the business of HTS. HTS 

cooperated with the staff’s investigation by proactively gathering communications from the 

personal devices of its personnel and responding to the staff’s requests for additional information. 

As reported to the Commission staff, HTS personnel who had engaged in the use of off-channel 

communications included senior managers and officers across the firm. 

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

various seniority levels of HTS’s broker-dealer and investment adviser businesses. Respondent 

collected data from a sampling of broker-dealer and investment adviser personnel at various 

seniority levels and found that most had engaged in at least some level of off-channel 

communications since August 2019.  Overall, these personnel sent and received numerous off-

channel communications, involving other HTS personnel and external contacts in the securities 

industry. As disclosed to the Commission staff, within HTS, a number of senior leaders 

participated in off-channel communications. 

22. From at least August 2019, HTS personnel sent and received off-channel 

communications that concerned the business of the broker-dealer.  

23. For example, from June to December 2022, a Hilltop department head exchanged 

text messages with a Hilltop managing director regarding the terms and pricing of certain 

transactions.  These messages related to HTS’s broker-dealer business as such. 

24. From at least August 2019, HTS investment adviser personnel sent and received 

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

204-2. 

25. For example, in October 2022, a Hilltop department head exchanged off-channel 

communications with a potential advisory client regarding a proposed roll-over investment. 

These messages related to, among other things, investment advice given or proposed to be given 

to an HTS investment advisory client.  

HTS’s Failure to Preserve Required Records Potentially 

Compromised and Delayed Commission Matters 

26. Between August 2019 and the present, HTS received and responded to 

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

investigations. By failing to maintain and preserve required records relating to its business, HTS 

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



 

 

6 

HTS’s Violations and Failure to Supervise 

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

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

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

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

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

thereunder. 

29. As a result of the conduct described above, HTS failed reasonably to supervise its 

personnel with a view to preventing or detecting certain of its personnel’s 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.  

30. As a result of the conduct described above, HTS failed reasonably to supervise its 

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

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

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

HTS’s Remedial and Cooperation Efforts 

31. In determining to accept the Offer, the Commission considered HTS’s self-report, 

cooperation afforded to Commission staff, and remediation. After identifying off-channel 

communications, Respondent conducted an internal investigation and self-reported the facts to 

Commission staff. Prior to approaching Commission staff, since at least August 2019, HTS had 

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

making investments in new technologies to improve surveillance and retention efforts; increasing 

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

complying with recordkeeping obligations; making an on-channel texting platform available in 

October 2019; and providing corporate mobile devices to its Executive Committee members in 

January 2021.  HTS also took proactive steps to collect and preserve off-channel communications. 

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

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

knows what he is doing.’” See Wonsover v. SEC, 205 F.3d 408, 414 (D.C. Cir 2000) (quoting 

Hughes v. SEC, 174 F.2d 969, 977 (D.C. Cir. 1949)).  There is no requirement that the actor 

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

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

for purposes of a differently structured statutory provision, does not alter that standard. 922 F.3d 

468, 478-79 (D.C. Cir. 2019) (setting forth the showing required to establish that a person has 

“willfully omit[ted]” material information from a required disclosure in violation of Section 207 

of the Advisers Act). 



 

 

7 

Undertakings 

32. Prior to this action, HTS 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 its personnel.  

In addition, HTS have undertaken to: 

33. Independent Compliance Consultant. 

a.  HTS 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 HTS. 

 

b.  HTS will oversee the work of the Compliance Consultant. 

 

c.  HTS 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. HTS shall require that, within ninety (90) days of the date of the engagement 

letter, the Compliance Consultant conduct: 

 

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

policies and procedures designed to ensure that HTS’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 HTS 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 HTS 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 

HTS 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 HTS has begun 

implementing to meet the record retention requirements of the federal securities 

laws, including an assessment of the likelihood that HTS personnel will use the 

technological solutions going forward and a review of the measures employed by 

HTS to track personnel usage of new technological solutions.  

 



 

 

8 

v.  An assessment of the measures used by HTS to prevent the use of 

unauthorized communications methods for business communications by 

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

HTS’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 HTS’s electronic communications surveillance routines to 

ensure that electronic communications through approved communications 

methods found on Personal Devices are incorporated into HTS’s overall 

communications surveillance program.   

 

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

address instances of non-compliance by HTS personnel with HTS’s policies and 

procedures concerning the use of Personal Devices to communicate about HTS 

business in the past. This review shall include a survey of how HTS determined 

which personnel failed to comply with HTS’s policies and procedures, the 

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

what penalties were imposed, and whether penalties were handed out consistently 

across business lines and seniority levels.   

 

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

review set forth in sub-paragraphs 33.c.i. through c.vii. above, the Compliance 

Consultant shall submit a detailed written report of its findings to HTS and to the 

Commission staff (the “Report”). HTS 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 HTS’s policies and procedures, and a summary of the plan for 

implementing the recommended changes in or improvements to HTS’s policies and 

procedures. 

 

e.  HTS 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, HTS shall advise the Compliance Consultant and the 

Commission staff in writing of any recommendations that HTS considers to be unduly 

burdensome, impractical, or inappropriate. With respect to any recommendation that HTS 

considers unduly burdensome, impractical, or inappropriate, HTS 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 HTS’s policies or procedures on which 

HTS and the Compliance Consultant do not agree, HTS 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 HTS and the Compliance Consultant, HTS shall require that the Compliance 



 

 

9 

Consultant inform HTS and the Commission staff in writing of the Compliance 

Consultant’s final determination concerning any recommendation that HTS considers to 

be unduly burdensome, impractical, or inappropriate. HTS shall abide by the 

determinations of the Compliance Consultant and, within sixty (60) days after final 

agreement between HTS and the Compliance Consultant or final determination by the 

Compliance Consultant, whichever occurs first, HTS shall adopt and implement all of the 

recommendations that the Compliance Consultant deems appropriate. 

 

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

the Compliance Consultant with access to such of HTS’s files, books, records, and 

personnel as are reasonably requested by the Compliance Consultant for review. 

 

h. HTS 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.  HTS shall compensate the 

Compliance Consultant and persons engaged to assist the Compliance Consultant for 

services rendered under this Order at its reasonable and customary rates. 

 

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

the engagement, HTS 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. 

 

34. One-Year Evaluation. HTS shall require the Compliance Consultant to assess 

HTS’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 33.d above. HTS shall require this review to 

evaluate HTS’s progress in the areas described in Paragraph 33.c.i through 33.c.vii above.  After 

this review, HTS shall require the Compliance Consultant to submit a report (the “One Year 

Report”) to HTS, and the Commission staff and shall ensure that the One Year Report includes 

an updated assessment of HTS’s policies and procedures with regard to the preservation of 



 

 

10 

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

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

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

HTS shall notify the Commission staff as follows upon the imposition of any discipline imposed 

by HTS, including, but not limited to, written warnings, loss of any pay, bonus, or incentive 

compensation, or the termination of employment, with respect to any personnel found to have 

violated HTS’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.   

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

the One Year Report, HTS will also have its Internal Audit function conduct a separate audit(s) to 

assess HTS’s progress in the areas described in Paragraph 33.c.i through 33.c.vii above.  After 

completion of this audit(s), HTS shall ensure that Internal Audit submits a report to HTS and to the 

Commission staff. 

37. Recordkeeping.  HTS 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.   
 

38. 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. 

39. Certification.  HTS 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 certifications and supporting 

material shall be submitted to Amy S. Cotter, Assistant Regional Director, Division of 

Enforcement, Chicago Regional Office, 175 West Jackson Boulevard, Suite 1450, Chicago, Illinois 

60604, or such other person as the Commission staff may request, with a copy to the Office of 

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

completion of the undertakings. 

IV. 

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

to impose the sanctions agreed to in Respondent’s Offer. 

 

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

203(e) and 203(k) of the Advisers 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. 



 

 

11 

B. Respondent cease and desist from committing or causing any violations and any 

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

C. Respondent is censured.  

 

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

39 above. 

 

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

penalty in the amount of $1,600,000 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 

 

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

HTS as the Respondent in this proceeding, and the file number of this proceeding; a copy of the 

cover letter and check or money order must be sent to Amy S. Cotter, Assistant Regional 

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

1450, Chicago, Illinois 60604.   

 

  

 

 

 

 

 



 

 

12 

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

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

preserve the deterrent effect of the civil penalty, 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