Firm to Pay $9 Million for E-Mail Compliance Failures
A large broker-dealer agreed to pay a $7.5 Million fine and establish a $1.5 Million reimbursement fund for widespread failures to retain and review e-mails. FINRA cited 35 failures over a 6-year period, including failure to supervise DBA e-mails used by independent contractor reps, losing track of hundreds of millions of e-mails during a transition to a less expensive e-mail archiver, failure to keep and review 3.5 million Bloomberg messages, and failing to archive certain customer e-mails. FINRA alleges that the firm knew about the problems but failed to take adequate corrective action. FINRA also charges that the failures resulted in incomplete responses to regulatory inquiries, civil litigation, and arbitrations. The e-mail problems resulted from rapid growth through acquisition. Brad Bennett, Executive Vice President and Chief of Enforcement, said that the firm “did not expand its compliance and technology infrastructure” as it grew. Mr. Bennett continued, “This case sends a strong message to firms to make sure your business does not outgrow your compliance systems.”
OUR TAKE: That’s a big fine. FINRA wants to send this firm and the industry a message that it will not tolerate a lack of spending on compliance infrastructure.