1. This matter concerns the failure of Ameriprise, a dually-registered investment adviser and broker-dealer, to adopt and implement policies and procedures reasonably designed to safeguard retail investor assets against misappropriation by the firm's representatives. Ameriprise provides investment advisory and brokerage services to advisory clients and brokerage customers (together, "the clients") through a national network of approximately 9,700 representatives. From 2011 through 2014 (the "relevant period"), as part of its compliance and supervisory systems, Ameriprise employed certain automated surveillance tools to prevent and detect whether a representative may have engaged in fraud by misappropriating funds from a client account. One system did not function properly and a second faced limitations, thereby preventing Ameriprise from detecting the misappropriation of over $1 million in client funds by five representatives. 

2. The first, known as the Fraud Early Detection System ("FEDS"), was intended, among other things, to identify situations where a representative attempted to change the address associated with a client's account to an address controlled by the representative (such as his home or business address). Ameriprise considered attempts to replace a client's address with an address controlled by a representative to be suspicious and indicative of a possible attempt to improperly gain control of the client's account and misappropriate funds. However, because of a technical error that went undetected until December 2013, FEDS did not function properly. Specifically, it did not identify instances where a representative sought to gain control of a client's account by improperly changing the address associated with the account to one that the representative controlled. One representative was able to perpetrate a fraud on two of her retail clients without Ameriprise detecting that the representative and her daughter improperly replaced client addresses on the account with their controlled addresses.

3. The second, an automated transaction-based analysis tool (hereinafter "Analysis Tool"), was intended to identify, among other things, situations where a representative attempted to direct a cash disbursement from a client account to an address controlled by a representative. Ameriprise viewed such a money movement as an indicator that a representative could be engaged in fraudulent activities. However, during the relevant period, because of a limitation in its design, with respect to cash disbursements via check, the Analysis Tool was unable to detect certain unauthorized disbursements from client accounts to addresses associated with the representative. In addition, the Analysis Tool was not utilized to detect fraudulent money movements where the disbursement was made by wire transfer. Ameriprise relied on a manual process to detect wire transfers to external accounts controlled by a representative. On multiple occasions during the relevant period, Ameriprise did not detect the fraudulent transfer of funds from client accounts to destinations that were controlled by its representatives. 

4. Each of the five representatives at issue, who are identified in Part III.C.3, was terminated by Ameriprise for misappropriating client funds (the "Terminated Representatives"). In violation of their fiduciary duties under the Advisers Act to their clients, the Terminated Representatives committed numerous unauthorized acts, including forging client documentation, making unauthorized address changes, and/or submitting requests to disburse client funds without their clients' knowledge or approval. All of the Terminated Representatives violated Sections 206(1) and 206(2) of the Advisers Act. Moreover, because in some instances, the misappropriation was in connection with the sale of securities, certain of the Terminated Representatives violated Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. 

5. As a result of the foregoing, Ameriprise violated Section 206(4) of the Advisers Act and Rule 206(4)-7 thereunder, and failed reasonably to supervise the Terminated Representatives within the meaning of Section 203(e)(6) of the Advisers Act and Section 15(b)(4) of the Exchange Act with a view to preventing and detecting the Terminated Representatives' violations of Sections 206(1) and 206(2) of the Advisers Act and Section 10(b) of the Exchange act and Rule 10b-5 thereunder.