In re Northwestern Mutual Investment

   
   
 
 
UNITED STATES OF AMERICA 
 Before the 
 SECURITIES AND EXCHANGE COMMISSION 
 
SECURITIES EXCHANGE ACT OF 1934 
Release No. 99501 / February 9, 2024 
 
INVESTMENT ADVISERS ACT OF 1940 
Release No. 6550 / February 9, 2024 
 
ADMINISTRATIVE PROCEEDING 
File No. 3-21850 
 
 
In the Matter of 
 
Northwestern Mutual Investment 
Services, LLC, Northwestern 
Mutual Investment Management 
Company, LLC, and Mason Street 
Advisors, LLC, 
 
Respondents. 
 
 
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”) against Northwestern Mutual Investment Services, LLC (“NMIS”) and 
Sections 203(e) and 203(k) of the Investment Advisers Act of 1940  (“Advisers Act”) against 
Northwestern Mutual Investment Management Company, LLC (“NMIMC”) and Mason Street 
Advisors, LLC (“MSA”) (collectively “Respondents”). 
 
II. 
 In anticipation of the institution of these proceedings, Respondents have submitted Offers 
of Settlement (“Offers”) that the Commission has determined to accept.  Respondents admit the 
facts set forth in Section III below, acknowledge that their conduct violated the federal securities 
laws, admit the Commission’s jurisdiction over them and the subject matter of these proceedings, 
and consent 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 

 
 
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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.   
 
III. 
 On the basis of this Order and Respondents’ Offers, 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 the widespread and longstanding failure of NMIS, 
NMIMC and MSA personnel throughout the firms, including at senior levels, to adhere to certain 
of these essential requirements and the firms’ own policies.  Using their personal devices, these  
personnel communicated both internally and externally by personal text messages (“off-channel 
communications”). 
3. From at least January 2019, NMIS personnel sent and received off-channel 
communications that related NMIS’s broker-dealer business, and NMIMC and MSA personnel 
sent and received off-channel communications that related to recommendations made or proposed 
to be made and advice given or proposed to be given.  Respondents did not maintain or preserve 
the substantial majority of these written communications.  Respondents’ failures were firm-wide 
and involved personnel at various levels of authority.  As a result, NMIS violated Section 17(a) 
of the Exchange Act and Rule 17a-4(b)(4) thereunder and NMIMC and MSA violated Section 
204 of the Advisers Act and Rule 204-2(a)(7) thereunder. 
4. NMIS’s, NMIMC’s, and MSA’s supervisors, who were responsible for 
supervising junior personnel, routinely communicated off-channel using their personal devices.  
In fact, a senior executive, a managing director, and senior supervisors responsible for 
supervising junior personnel themselves failed to comply with NMIS’s , NMIMC’s, and MSA’s 
policies by communicating using non-NMIS, NMIMC or MSA approved methods on their 
personal devices about NMIS’s broker-dealer and/or NMIMC’s or MSA’s investment adviser 
businesses, as applicable.  
5. NMIS’s, NMIMC’s and MSA’s widespread failure to implement their policies 
and procedures that prohibit such communications led to their failure reasonably to supervise 
their personnel within the meaning of Section 15(b)(4)(E) of the Exchange Act, with respect to 
NMIS, and Section 203(e)(6) of the Advisers Act, with respect to NMIMC and MSA.  
 
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  The findings herein are made pursuant to Respondents’ Offers of Settlement and are not 
binding on any other person or entity in this or any other proceeding.  
 

 
 
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6. During the time period that NMIS failed to maintain and preserve off-channel 
communications that its personnel sent and received related to NMIS’s broker-dealer business, 
NMIS received and responded to Commission subpoenas for documents and/or records requests 
in several Commission investigations.  As a result, NMIS’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 NMIS’s, NMIMC’s and MSA’s misconduct after 
commencing a risk-based initiative to investigate the use of off-channel and unpreserved 
communications at broker-dealers.  NMIS, NMIMC and MSA have initiated a review of their 
recordkeeping failures and begun a program of remediation.  As set forth in the Undertakings 
below, NMIS, NMIMC and MSA will retain an independent compliance consultant to review 
and assess NMIS’s, NMIMC’s and MSA’s remedial steps relating to NMIS’s, NMIMC’s and 
MSA’s recordkeeping practices, policies and procedures, related supervisory practices, and 
employment actions. 
Respondents 
8. NMIS is a Wisconsin limited liability company with its principal office in 
Milwaukee, Wisconsin, and is registered with the Commission as a broker-dealer and investment 
adviser. 
9. NMIMC is a Delaware limited liability company with its principal office in 
Milwaukee, Wisconsin, and is registered with the Commission as an investment adviser. 
10. MSA is a Delaware limited liability company with its principal office in 
Milwaukee, Wisconsin, and is registered with the Commission as an investment adviser. 
Recordkeeping Requirements under the Exchange and Advisers Acts 
11. 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 otherwise in 
furtherance of the purposes of the Exchange Act and the Advisers Act. 
12. 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.  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 
firm’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.  

 
 
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13. 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, any recommendations made or proposed to be made and any advice given or proposed to be 
given. 
14. 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). 
NMIS’s, NMIMC’s and MSA’s Policies and Procedures 
15. NMIS, NMIMC and MSA 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. NMIS’s, NMIMC’s and MSA’s 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 unapproved applications on their 
personal devices.  
17. Messages sent through NMIS’s, NMIMC’s and MSA’s approved communications 
methods were monitored, subject to review, and, when appropriate, archived.  Messages sent 
through unapproved communications methods, such as unapproved applications on personal 
devices, were not monitored, subject to review or archived. 
18. NMIS’s, NMIMC’s and MSA’s policies were designed to address supervisors’ 
supervision of personnel training in NMIS’s, NMIMC’s and MSA’s communications policies 
and adherence to NMIS’s, NMIMC’s and MSA’s respective books and recordkeeping 
requirements.  Supervisory policies notified personnel that electronic communications were 
subject to surveillance by NMIS, NMIMC or MSA.  NMIS, NMIMC and MSA had procedures 
for all personnel, including supervisors, requiring annual self-attestations of compliance. 
19. NMIS, NMIMC and MSA, however, failed to implement a system of follow-up 
and review to determine that supervisors were reasonably following NMIS’s, NMIMC’s or 
MSA’s policies.  While permitting personnel to use approved communications methods, 
including on personal phones, for business communications, NMIS, NMIMC and MSA failed to 
implement sufficient monitoring to assure that their recordkeeping and communications policies 
were being followed.  
 

 
 
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NMIS’s, NMIMC’s and MSA’s Recordkeeping Failures Across Their Businesses 
 
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.  NMIS, NMIMC and MSA cooperated with the investigation by 
voluntarily gathering and reviewing communications from the personal devices of a sampling of 
senior personnel.  These personnel included senior leadership, including individuals in wealth 
and investment management, private debt and equity, private equity funds, and product and 
administration. 
21. The Commission staff’s investigation uncovered pervasive off-channel 
communications at various seniority levels of NMIS’s broker-dealer and NMIMC’s and MSA’s 
investment advisers.  The staff requested off-channel communications data from a sampling of 
NMIS’s broker-dealer and NMIMC’s and MSA’s investment adviser personnel and found that 
certain of the individuals had engaged in at least some level of off-channel communications.  
Overall, these personnel sent and received off-channel communications involving NMIS’s, 
NMIMC’s or MSA’s more junior personnel, NMIMC’s parent company,  which is an NMIMC 
investment advisory client, and external contacts in the securities industry.  NMIS’s 
communications related to the broker-dealer business as such, and NMIMC’s and MSA’s 
communications related to advice given or proposed to be given to investment advisory clients.   
22. From at least January 2019, NMIS personnel sent and received off-channel 
messages that concerned the business of the broker-dealer.  During this period, NMIMC and 
MSA personnel sent and received off-channel messages that related to, among other things, 
recommendations made or proposed to be made and investment advice given or proposed to be 
given to advisory clients.  
23. For example, in June and July 2022, an NMIS Vice-President exchanged 
off-channel messages with another NMIS colleague and with a junior employee under their 
supervision.  These messages related to the broker-dealer’s business as such. 
24. In another example, from June to November 2021, an NMIMC Managing Partner 
exchanged off-channel messages with NMIMC colleagues and other external contacts in the 
securities industry.  These messages related to investment advice proposed to be given to 
advisory clients.  
25. In a final example, in January 2022, a senior officer at MSA exchanged off-channel 
messages with another MSA employee regarding investment advice proposed to be given to 
advisory clients. 
NMIS’s Failure to Preserve Required Records Potentially 
Compromised and Delayed Commission Matters 
26. Between January 2019 and the present, NMIS received and responded to 
Commission subpoenas for documents and/or records requests in Commission investigations.  

 
 
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By failing to maintain and preserve required records relating to its business, NMIS likely 
deprived the Commission of these off-channel communications in various investigations. 
NMIS’s, NMIMC’s and MSA’s Violations and Failure to Supervise 
27. As a result of the conduct described above, from at least January 2019 through the 
date of this Order, NMIS willfully
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 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.   
28. As a result of the conduct described above, from at least January 2019 through the 
date of this Order, NMIMC and MSA willfully violated Section 204 of the Advisers Act and Rule 
204-2(a)(7) thereunder, which require investment advisers to preserve in an easily accessible place 
originals of all    written communications received and copies of all    written communications sent 
relating to, among other things, any recommendations  made or proposed to be made and any advice 
given or proposed to be given. 
29. As a result of the conduct described above, NMIS failed reasonably to supervise 
its personnel with a view to preventing or detecting certain of its personnel 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, NMIMC and MSA failed reasonably to 
supervise their personnel with a view to preventing or detecting certain of its personnel 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. 
NMIS’s, NMIMC’s and MSA’s Remedial Efforts 
31. In determining to accept the Offers, the Commission considered steps promptly 
undertaken by NMIS, NMIMC and MSA, in part before the Commission’s inquiry, and 
cooperation afforded the Commission staff. 
 
 
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, Respondents enhanced their policies and procedures; 
increased training concerning the use of approved communications methods, including on 
personal devices; and began implementing changes to the technology available to personnel.  In 
addition, Respondents have undertaken to: 
 Independent Compliance Consultant. 
a.  NMIS, NMIMC and MSA shall each 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 NMIS, NMIMC 
and MSA. 
 
b.  NMIS, NMIMC and MSA will oversee the work of the Compliance 
Consultant. 
 
c.  NMIS, NMIMC and MSA 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.  NMIS, NMIMC and MSA shall require that, 
within ninety (90) days of the date of the engagement letter, the Compliance Consultant 
conduct: 
 
i.  A comprehensive review of NMIS’s, NMIMC’s and MSA’s 
supervisory, compliance, and other policies and procedures designed to ensure 
that NMIS’s, NMIMC’s and MSA’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 NMIS, NMIMC and 
MSA to ensure NMIS’s, NMIMC’s and MSA’s 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 NMIS’s, NMIMC’s and MSA’s 
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 
NMIS, NMIMC and MSA to ensure compliance, on an ongoing basis, with the 

 
 
8 
 
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 NMIS, NMIMC and 
MSA have begun implementing to meet the record retention requirements of the 
federal securities laws, including an assessment of the likelihood that NMIS’s, 
NMIMC’s and MSA’s personnel will use the technological solutions going 
forward and a review of the measures employed by NMIS, NMIMC and MSA to 
track usage of new technological solutions by personnel.  
 
v.  An assessment of the measures used by NMIS, NMIMC and MSA 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 NMIS’s, NMIMC’s and MSA’s p olicies 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 NMIS’s, NMIMC’s and MSA’s electronic 
communications surveillance routines to ensure that electronic communications 
through approved communications methods found on Personal Devices are 
incorporated into NMIS’s, NMIMC’s and MSA’s overall communications 
surveillance program.   
 
vii.  A comprehensive review of the framework adopted by NMIS, 
NMIMC and MSA to address instances of non-compliance by NMIS’s, 
NMIMC’s and MSA’s personnel with NMIS’s, NMIMC’s and MSA’s policies 
and procedures concerning the use of Personal Devices to communicate about 
NMIS, NMIMC and MSA business in the past.  This review shall include a 
survey of how NMIS, NMIMC and MSA determined which personnel failed to 
comply with NMIS’s, NMIMC’s and MSA’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. NMIS, NMIMC and MSA shall require that, within forty-five (45) days after 
completion of the review set forth in sub-paragraphs 32.c.i. through 32.c.vii. above, the 
Compliance Consultant shall submit a detailed written report of its findings to NMIS, 
NMIMC and MSA and to the Commission staff (the “Report”).  NMIS, NMIMC and 
MSA 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 NMIS’s, 
NMIMC’s and MSA’s  policies and procedures, and a summary of the plan for 
implementing the recommended changes in or improvements to NMIS’s, NMIMC’s and 
MSA’s policies and procedures. 
 

 
 
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e.  NMIS, NMIMC and MSA 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, NMIS, NMIMC, and MSA shall advise 
the Compliance Consultant and the Commission staff in writing of any recommendations 
that NMIS, NMIMC or MSA consider to be unduly burdensome, impractical, or 
inappropriate.  With respect to any recommendation that NMIS, NMIMC or MSA 
consider unduly burdensome, impractical, or inappropriate, NMIS, NMIMC or MSA 
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 NMIS’s, NMIMC’s or MSA’s policies 
or procedures on which NMIS, NMIMC or MSA and the Compliance Consultant do not 
agree, NMIS, NMIMC or MSA 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 NMIS, NMIMC 
and MSA and the Compliance Consultant, NMIS, NMIMC and MSA shall require that 
the Compliance Consultant inform NMIS, NMIMC and MSA and the Commission staff 
in writing of the Compliance Consultant’s final determination concerning any 
recommendation that NMIS, NMIMC or MSA considers to be unduly burdensome, 
impractical, or inappropriate.  NMIS, NMIMC and MSA shall abide by the 
determinations of the Compliance Consultant and, within sixty (60) days after final 
agreement between NMIS, NMIMC and MSA and the Compliance Consultant or final 
determination by the Compliance Consultant, whichever occurs first, NMIS, NMIMC 
and MSA shall adopt and implement all of the recommendations that the Compliance 
Consultant deems appropriate. 
 
g.  NMIS, NMIMC and MSA shall cooperate fully with the Compliance 
Consultant and shall provide the Compliance Consultant with access to such of NMIS’s, 
NMIMC’s and MSA’s files, books, records, and personnel as are reasonably requested by 
the Compliance Consultant for review. 
 
h. NMIS, NMIMC and MSA 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.  
NMIS, NMIMC and MSA shall compensate the Compliance Consultant and persons 
engaged to assist the Compliance Consultant for services rendered under this Order at 
their reasonable and customary rates. 
 
i.  For the period of engagement and for a period of two years from completion of 
the engagement, NMIS, NMIMC and MSA 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 

 
 
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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. 
 
33.  One-Year Evaluation.  NMIS, NMIMC and MSA shall each require the 
Compliance Consultant to assess NMIS’s, NMIMC’s and MSA’s programs 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 32.d above.  NMIS, NMIMC and MSA shall require this review to evaluate NMIS’s, 
NMIMC’s and MSA’s progress in the areas described in Paragraph 32.c.i-vii above.  After this 
review, NMIS, NMIMC and MSA shall require the Compliance Consultant to submit a report 
(the “One Year Report”) to each of NMIS, NMIMC and MSA and the Commission staff and 
shall ensure that the One Year Report includes an updated assessment of NMIS’s, NMIMC’s and 
MSA’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.  
 
34. Reporting Discipline Imposed.  For two years following the entry of this Order, 
NMIS, NMIMC and MSA shall notify the Commission staff as follows upon the imposition of any 
discipline imposed by NMIS, NMIMC or MSA, 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 NMIS’s, NMIMC’s or MSA’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.    
 
35  .  Internal Audit.  In addition to the Compliance Consultant’s review and issuance of 
the One Year Report, NMIS, NMIMC and MSA will each also have their respective Internal 
Audit function conduct a separate audit(s) to assess NMIS’s, NMIMC’s and MSA’s progress in 
the areas described in Paragraph 32.c.i-vii above.  After completion of this audit(s), NMIS, 
NMIMC and MSA shall ensure that Internal Audit submits a report to each of NMIS, NMIMC 
and MSA and to the Commission staff. 
 
 36.  Recordkeeping.  NMIS 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. NMIMC and MSA shall each preserve any record 
of compliance with t hese undertakings in an easily accessible place for a period of not less than 

 
 
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five (5) years from the end of the fiscal year during which the entry was made on such record, the 
first two (2) years in an appropriate office of NMIMC and MSA.  
 
 37.    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. 
 
38.   Certification.  NMIS, NMIMC and MSA shall each certify, in writing, 
compliance with the undertakings set forth above.  The certifications 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 Respondents agree to provide such 
evidence.  The certifications and supporting material shall be submitted to Amy S. Cotter, 
Assistant Director, Division of Enforcement, Chicago Regional Office, Securities and Exchange 
Commission, 175 W. Jackson Blvd., Suite 1450, Chicago, IL 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 Respondents’ Offers. 
 
 Accordingly, pursuant to Sections 15(b) and 21C of the Exchange Act as to NMIS and 
Sections 203(e) and 203(k) of the Advisers Act as to NMIMC and MSA, it is hereby ORDERED 
that: 
 
A. NMIS 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. NMIMC and MSA 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. Respondents are censured.  
 
D. Respondents shall comply with the undertakings enumerated in paragraphs 32 to 
38 above. 
  
 E. Respondents shall, jointly and severally, within 14 days of the entry of this Order, 
pay a civil money penalty in the amount of $16,500,000 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.   
 

 
 
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 Payment must be made in one of the following ways:   
 
(1) Respondents may transmit payment electronically to the Commission, 
which will provide detailed ACH transfer/Fedwire instructions upon 
request;  
 
(2) Respondents 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) Respondents 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 
NMIS, NMIMC and MSA as the Respondents 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 Amy S. Cotter, 
Assistant Director, Division of Enforcement, Chicago Regional Office, Securities and Exchange 
Commission, 175 W. Jackson Blvd., Suite 1450, Chicago, IL 60604.   
 
 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, Respondents agree that in any Related Investor 
Action, they shall not argue that they are entitled to, nor shall they benefit by, offset or reduction 
of any award of compensatory damages by the amount of any part of Respondents’ payment of a 
civil penalty in this action (“Penalty Offset”).  If the court in any Related Investor Action grants 
such a Penalty Offset, Respondents agree that they 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 Respondents 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. 99501 / February 9, 2024 
 
INVESTMENT ADVISERS ACT OF 1940 
Release No. 6550 / February 9, 2024 
 
ADMINISTRATIVE PROCEEDING 
File No. 3-21850 
 
 
In the Matter of 
 

Northwestern Mutual Investment 
Services, LLC, Northwestern 
Mutual Investment Management 
Company, LLC, and Mason Street 
Advisors, LLC, 

 
Respondents. 
 

 
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”) against Northwestern Mutual Investment Services, LLC (“NMIS”) and 
Sections 203(e) and 203(k) of the Investment Advisers Act of 1940  (“Advisers Act”) against 
Northwestern Mutual Investment Management Company, LLC (“NMIMC”) and Mason Street 
Advisors, LLC (“MSA”) (collectively “Respondents”). 

 
II. 

 In anticipation of the institution of these proceedings, Respondents have submitted Offers 
of Settlement (“Offers”) that the Commission has determined to accept.  Respondents admit the 
facts set forth in Section III below, acknowledge that their conduct violated the federal securities 
laws, admit the Commission’s jurisdiction over them and the subject matter of these proceedings, 
and consent 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 



 
 

2 
 

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.   
 

III. 

 On the basis of this Order and Respondents’ Offers, 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 the widespread and longstanding failure of NMIS, 
NMIMC and MSA personnel throughout the firms, including at senior levels, to adhere to certain 
of these essential requirements and the firms’ own policies.  Using their personal devices, these  
personnel communicated both internally and externally by personal text messages (“off-channel 
communications”). 

3. From at least January 2019, NMIS personnel sent and received off-channel 
communications that related NMIS’s broker-dealer business, and NMIMC and MSA personnel 
sent and received off-channel communications that related to recommendations made or proposed 
to be made and advice given or proposed to be given.  Respondents did not maintain or preserve 
the substantial majority of these written communications.  Respondents’ failures were firm-wide 
and involved personnel at various levels of authority.  As a result, NMIS violated Section 17(a) 
of the Exchange Act and Rule 17a-4(b)(4) thereunder and NMIMC and MSA violated Section 
204 of the Advisers Act and Rule 204-2(a)(7) thereunder. 

4. NMIS’s, NMIMC’s, and MSA’s supervisors, who were responsible for 
supervising junior personnel, routinely communicated off-channel using their personal devices.  
In fact, a senior executive, a managing director, and senior supervisors responsible for 
supervising junior personnel themselves failed to comply with NMIS’s, NMIMC’s, and MSA’s 
policies by communicating using non-NMIS, NMIMC or MSA approved methods on their 
personal devices about NMIS’s broker-dealer and/or NMIMC’s or MSA’s investment adviser 
businesses, as applicable.  

5. NMIS’s, NMIMC’s and MSA’s widespread failure to implement their policies 
and procedures that prohibit such communications led to their failure reasonably to supervise 
their personnel within the meaning of Section 15(b)(4)(E) of the Exchange Act, with respect to 
NMIS, and Section 203(e)(6) of the Advisers Act, with respect to NMIMC and MSA.  

 
1  The findings herein are made pursuant to Respondents’ Offers of Settlement and are not 
binding on any other person or entity in this or any other proceeding.  
 



 
 

3 
 

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

Respondents 

8. NMIS is a Wisconsin limited liability company with its principal office in 
Milwaukee, Wisconsin, and is registered with the Commission as a broker-dealer and investment 
adviser. 

9. NMIMC is a Delaware limited liability company with its principal office in 
Milwaukee, Wisconsin, and is registered with the Commission as an investment adviser. 

10. MSA is a Delaware limited liability company with its principal office in 
Milwaukee, Wisconsin, and is registered with the Commission as an investment adviser. 

Recordkeeping Requirements under the Exchange and Advisers Acts 

11. 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 otherwise in 
furtherance of the purposes of the Exchange Act and the Advisers Act. 

12. 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.  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 
firm’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.  



 
 

4 
 

13. 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, any recommendations made or proposed to be made and any advice given or proposed to be 
given. 

14. 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). 

NMIS’s, NMIMC’s and MSA’s Policies and Procedures 

15. NMIS, NMIMC and MSA 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. NMIS’s, NMIMC’s and MSA’s 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 unapproved applications on their 
personal devices.  

17. Messages sent through NMIS’s, NMIMC’s and MSA’s approved communications 
methods were monitored, subject to review, and, when appropriate, archived.  Messages sent 
through unapproved communications methods, such as unapproved applications on personal 
devices, were not monitored, subject to review or archived. 

18. NMIS’s, NMIMC’s and MSA’s policies were designed to address supervisors’ 
supervision of personnel training in NMIS’s, NMIMC’s and MSA’s communications policies 
and adherence to NMIS’s, NMIMC’s and MSA’s respective books and recordkeeping 
requirements.  Supervisory policies notified personnel that electronic communications were 
subject to surveillance by NMIS, NMIMC or MSA.  NMIS, NMIMC and MSA had procedures 
for all personnel, including supervisors, requiring annual self-attestations of compliance. 

19. NMIS, NMIMC and MSA, however, failed to implement a system of follow-up 
and review to determine that supervisors were reasonably following NMIS’s, NMIMC’s or 
MSA’s policies.  While permitting personnel to use approved communications methods, 
including on personal phones, for business communications, NMIS, NMIMC and MSA failed to 
implement sufficient monitoring to assure that their recordkeeping and communications policies 
were being followed.  

 



 
 

5 
 

 
NMIS’s, NMIMC’s and MSA’s Recordkeeping Failures Across Their Businesses 

 
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.  NMIS, NMIMC and MSA cooperated with the investigation by 
voluntarily gathering and reviewing communications from the personal devices of a sampling of 
senior personnel.  These personnel included senior leadership, including individuals in wealth 
and investment management, private debt and equity, private equity funds, and product and 
administration. 

21. The Commission staff’s investigation uncovered pervasive off-channel 
communications at various seniority levels of NMIS’s broker-dealer and NMIMC’s and MSA’s 
investment advisers.  The staff requested off-channel communications data from a sampling of 
NMIS’s broker-dealer and NMIMC’s and MSA’s investment adviser personnel and found that 
certain of the individuals had engaged in at least some level of off-channel communications.  
Overall, these personnel sent and received off-channel communications involving NMIS’s, 
NMIMC’s or MSA’s more junior personnel, NMIMC’s parent company, which is an NMIMC 
investment advisory client, and external contacts in the securities industry.  NMIS’s 
communications related to the broker-dealer business as such, and NMIMC’s and MSA’s 
communications related to advice given or proposed to be given to investment advisory clients.   

22. From at least January 2019, NMIS personnel sent and received off-channel 
messages that concerned the business of the broker-dealer.  During this period, NMIMC and 
MSA personnel sent and received off-channel messages that related to, among other things, 
recommendations made or proposed to be made and investment advice given or proposed to be 
given to advisory clients.  

23. For example, in June and July 2022, an NMIS Vice-President exchanged 
off-channel messages with another NMIS colleague and with a junior employee under their 
supervision.  These messages related to the broker-dealer’s business as such. 

24. In another example, from June to November 2021, an NMIMC Managing Partner 
exchanged off-channel messages with NMIMC colleagues and other external contacts in the 
securities industry.  These messages related to investment advice proposed to be given to 
advisory clients.  

25. In a final example, in January 2022, a senior officer at MSA exchanged off-channel 
messages with another MSA employee regarding investment advice proposed to be given to 
advisory clients. 

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

26. Between January 2019 and the present, NMIS received and responded to 
Commission subpoenas for documents and/or records requests in Commission investigations.  



 
 

6 
 

By failing to maintain and preserve required records relating to its business, NMIS likely 
deprived the Commission of these off-channel communications in various investigations. 

NMIS’s, NMIMC’s and MSA’s Violations and Failure to Supervise 

27. As a result of the conduct described above, from at least January 2019 through the 
date of this Order, NMIS 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.   

28. As a result of the conduct described above, from at least January 2019 through the 
date of this Order, NMIMC and MSA willfully violated Section 204 of the Advisers Act and Rule 
204-2(a)(7) thereunder, which require investment advisers to preserve in an easily accessible place 
originals of all written communications received and copies of all written communications sent 
relating to, among other things, any recommendations made or proposed to be made and any advice 
given or proposed to be given. 

29. As a result of the conduct described above, NMIS failed reasonably to supervise 
its personnel with a view to preventing or detecting certain of its personnel 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, NMIMC and MSA failed reasonably to 
supervise their personnel with a view to preventing or detecting certain of its personnel 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. 

NMIS’s, NMIMC’s and MSA’s Remedial Efforts 

31. In determining to accept the Offers, the Commission considered steps promptly 
undertaken by NMIS, NMIMC and MSA, in part before the Commission’s inquiry, and 
cooperation afforded the Commission staff. 

 

 
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, Respondents enhanced their policies and procedures; 
increased training concerning the use of approved communications methods, including on 
personal devices; and began implementing changes to the technology available to personnel.  In 
addition, Respondents have undertaken to: 

 Independent Compliance Consultant. 

a.  NMIS, NMIMC and MSA shall each 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 NMIS, NMIMC 
and MSA. 

 
b.  NMIS, NMIMC and MSA will oversee the work of the Compliance 

Consultant. 
 
c.  NMIS, NMIMC and MSA 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.  NMIS, NMIMC and MSA shall require that, 
within ninety (90) days of the date of the engagement letter, the Compliance Consultant 
conduct: 

 
i.  A comprehensive review of NMIS’s, NMIMC’s and MSA’s 

supervisory, compliance, and other policies and procedures designed to ensure 
that NMIS’s, NMIMC’s and MSA’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 NMIS, NMIMC and 

MSA to ensure NMIS’s, NMIMC’s and MSA’s 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 NMIS’s, NMIMC’s and MSA’s 
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 

NMIS, NMIMC and MSA to ensure compliance, on an ongoing basis, with the 



 
 

8 
 

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 NMIS, NMIMC and 

MSA have begun implementing to meet the record retention requirements of the 
federal securities laws, including an assessment of the likelihood that NMIS’s, 
NMIMC’s and MSA’s personnel will use the technological solutions going 
forward and a review of the measures employed by NMIS, NMIMC and MSA to 
track usage of new technological solutions by personnel.  

 
v.  An assessment of the measures used by NMIS, NMIMC and MSA 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 NMIS’s, NMIMC’s and MSA’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 NMIS’s, NMIMC’s and MSA’s electronic 

communications surveillance routines to ensure that electronic communications 
through approved communications methods found on Personal Devices are 
incorporated into NMIS’s, NMIMC’s and MSA’s overall communications 
surveillance program.   

 
vii.  A comprehensive review of the framework adopted by NMIS, 

NMIMC and MSA to address instances of non-compliance by NMIS’s, 
NMIMC’s and MSA’s personnel with NMIS’s, NMIMC’s and MSA’s policies 
and procedures concerning the use of Personal Devices to communicate about 
NMIS, NMIMC and MSA business in the past.  This review shall include a 
survey of how NMIS, NMIMC and MSA determined which personnel failed to 
comply with NMIS’s, NMIMC’s and MSA’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. NMIS, NMIMC and MSA shall require that, within forty-five (45) days after 

completion of the review set forth in sub-paragraphs 32.c.i. through 32.c.vii. above, the 
Compliance Consultant shall submit a detailed written report of its findings to NMIS, 
NMIMC and MSA and to the Commission staff (the “Report”).  NMIS, NMIMC and 
MSA 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 NMIS’s, 
NMIMC’s and MSA’s  policies and procedures, and a summary of the plan for 
implementing the recommended changes in or improvements to NMIS’s, NMIMC’s and 
MSA’s policies and procedures. 

 



 
 

9 
 

e.  NMIS, NMIMC and MSA 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, NMIS, NMIMC, and MSA shall advise 
the Compliance Consultant and the Commission staff in writing of any recommendations 
that NMIS, NMIMC or MSA consider to be unduly burdensome, impractical, or 
inappropriate.  With respect to any recommendation that NMIS, NMIMC or MSA 
consider unduly burdensome, impractical, or inappropriate, NMIS, NMIMC or MSA 
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 NMIS’s, NMIMC’s or MSA’s policies 

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

 
g.  NMIS, NMIMC and MSA shall cooperate fully with the Compliance 

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

 
h. NMIS, NMIMC and MSA 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.  
NMIS, NMIMC and MSA shall compensate the Compliance Consultant and persons 
engaged to assist the Compliance Consultant for services rendered under this Order at 
their reasonable and customary rates. 

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

the engagement, NMIS, NMIMC and MSA 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 



 
 

10 
 

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. 
 
33.  One-Year Evaluation.  NMIS, NMIMC and MSA shall each require the 

Compliance Consultant to assess NMIS’s, NMIMC’s and MSA’s programs 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 32.d above.  NMIS, NMIMC and MSA shall require this review to evaluate NMIS’s, 
NMIMC’s and MSA’s progress in the areas described in Paragraph 32.c.i-vii above.  After this 
review, NMIS, NMIMC and MSA shall require the Compliance Consultant to submit a report 
(the “One Year Report”) to each of NMIS, NMIMC and MSA and the Commission staff and 
shall ensure that the One Year Report includes an updated assessment of NMIS’s, NMIMC’s and 
MSA’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.  

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

NMIS, NMIMC and MSA shall notify the Commission staff as follows upon the imposition of any 
discipline imposed by NMIS, NMIMC or MSA, 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 NMIS’s, NMIMC’s or MSA’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.    

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

the One Year Report, NMIS, NMIMC and MSA will each also have their respective Internal 
Audit function conduct a separate audit(s) to assess NMIS’s, NMIMC’s and MSA’s progress in 
the areas described in Paragraph 32.c.i-vii above.  After completion of this audit(s), NMIS, 
NMIMC and MSA shall ensure that Internal Audit submits a report to each of NMIS, NMIMC 
and MSA and to the Commission staff. 

 
 36.  Recordkeeping.  NMIS 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. NMIMC and MSA shall each preserve any record 
of compliance with these undertakings in an easily accessible place for a period of not less than 



 
 

11 
 

five (5) years from the end of the fiscal year during which the entry was made on such record, the 
first two (2) years in an appropriate office of NMIMC and MSA.  
 
 37.    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. 
 

38.   Certification.  NMIS, NMIMC and MSA shall each certify, in writing, 
compliance with the undertakings set forth above.  The certifications 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 Respondents agree to provide such 
evidence.  The certifications and supporting material shall be submitted to Amy S. Cotter, 
Assistant Director, Division of Enforcement, Chicago Regional Office, Securities and Exchange 
Commission, 175 W. Jackson Blvd., Suite 1450, Chicago, IL 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 Respondents’ Offers. 
 
 Accordingly, pursuant to Sections 15(b) and 21C of the Exchange Act as to NMIS and 
Sections 203(e) and 203(k) of the Advisers Act as to NMIMC and MSA, it is hereby ORDERED 
that: 
 

A. NMIS 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. NMIMC and MSA 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. Respondents are censured.  
 
D. Respondents shall comply with the undertakings enumerated in paragraphs 32 to 

38 above. 
  
 E. Respondents shall, jointly and severally, within 14 days of the entry of this Order, 

pay a civil money penalty in the amount of $16,500,000 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.   

 



 
 

12 
 

 Payment must be made in one of the following ways:   
 

(1) Respondents may transmit payment electronically to the Commission, 
which will provide detailed ACH transfer/Fedwire instructions upon 
request;  

 
(2) Respondents 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) Respondents 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 

NMIS, NMIMC and MSA as the Respondents 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 Amy S. Cotter, 
Assistant Director, Division of Enforcement, Chicago Regional Office, Securities and Exchange 
Commission, 175 W. Jackson Blvd., Suite 1450, Chicago, IL 60604.   
 
 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, Respondents agree that in any Related Investor 
Action, they shall not argue that they are entitled to, nor shall they benefit by, offset or reduction 
of any award of compensatory damages by the amount of any part of Respondents’ payment of a 
civil penalty in this action (“Penalty Offset”).  If the court in any Related Investor Action grants 
such a Penalty Offset, Respondents agree that they 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 Respondents 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
	Respondents.
	I.
	II.
	III.
	Summary
	Respondents
	Recordkeeping Requirements under the Exchange and Advisers Acts
	NMIS’s, NMIMC’s and MSA’s Policies and Procedures
	NMIS’s, NMIMC’s and MSA’s Recordkeeping Failures Across Their Businesses
	NMIS’s Failure to Preserve Required Records Potentially Compromised and Delayed Commission Matters
	NMIS’s, NMIMC’s and MSA’s Violations and Failure to Supervise
	NMIS’s, NMIMC’s and MSA’s Remedial Efforts

	IV.