FINRA Adopts New Supervisory Rules; Guidance on Email Reviews
FINRA has adopted new supervisory rules addressing required supervisory systems, Written Supervisory Procedures, Branch-office inspections, testing, and other related requirements. New rules 3110 and 3120 replace Rules 3010 and 3012 and add some additional requirements. In its Regulatory Notice, FINRA offers guidance on reviews of electronic communications, including customer correspondence as well as internal communications. FINRA acknowledges that firms may use a “lexicon-based” screening tool or system for email reviews but each supervisor “is responsible for any deficiency in the system’s criteria that would result in the system not being reasonably designed.”
OUR TAKE: Said another way, a firm does not get a free pass just for using an exception-based email review system. If a questionable email gets through, FINRA may still bring an action. Regardless, we recommend that firms utilize an email review system for the huge volume of communications.