By default PeopleSoft delivers a series of connectors in the Integration Gateway to handle files in various ways. One of which is Secure File Transfer Protocol (SFTP). While working on a new environment I ran into a testing error where the Integration Broker went to an error status after trying to invoke an SFTP Target.
It turns out that there is a Service Operation called: INVOKE_SFTP. This service operation is called to handle requests through the SFTP Target. The error I was receiving was related to the OnRequestHandler, and sure enough the handle on the INVOKE_SFTP Service Operation was inactive. After changing that to Active everything started working perfectly. It should also be noted that there needs to valid active routing on the Service Operation in order for it to process correctly.