NEXT Financial Group, Inc. will pay a $250,000 fine and perform an audit to identify all non-company email accounts that were used by the firm’s registered persons to conduct communications that were securities-related. It will also identify whether the accounts were captured by its servers, reviewed during regular email surveillance, and retained according to federal securities laws and FINRA rules. NEXT Financial will then present a written statement to the SRO describing the audit results and any corrective action to make sure that emails are captured, retained, and reviewed in the future.
FINRA says that for four years, two of NEXT Financial’s registered representatives ran an outside business activity that was approved and, during certain times, they outside business email addresses to communicate with customers about out securities-related matters. The SRO says that firm’s written supervisory procedures let registered persons communicate with NEXT Financial customers via the non-firm email accounts as long as the external domain names were firm-hosted and approved and could be captured and reviewed on the company’s server.
However, says the SRO, during a yearly branch audit, NEXT Financial found that registered representatives’ outside emails were not being maintained or captured on the server and, as a result, no review was taking place. FINRA contends that even after discovering this, NEXT financial did not take corrective action.
NEXT Financial consented to the sanctions described by FINRA, as well as to the entry of findings but did not deny or admit to them.
FINRA E-mail Enforcement Actions
According to InvestmentNews, FINRA has been stepping up its e-mail enforcement actions as of late, with the number of e-mail related violations rising. The SRO imposed $6.5 million in fines over this matter last year—an 81% rise from the year prior—over 632 email cases.
FINRA and the Securities and Exchange Commission mandate that brokerage firms set up systems and written procedures to catch and hold all e-mail communications with members of the public for three years. The firms also must pre-approve or regularly examine at least some e-mail samplings sent to customers by brokers. Unfortunately, proper retention and review of emails is proving to be a struggle for some brokerage firms.
Finra going all out to control e-mail, InvestmentNews, May 26, 2013
More Blog Posts:
LPL Financial Ordered to Pay $7.5M FINRA Fine Over E-Mail Failures, Institutional Investor Securities Blog, May 22, 2013
Next Financial Ordered to Pay One Million Dollars for Supervisory Deficiencies that Led to Texas Securities Fraud, Stockbroker Fraud Blog, August 4, 2009
FINRA NEWS: Goldman Sachs Appeals Vacating of Securities Award, Non-Customers of Brokerage Firm Can’t Compel Arbitration, & Three Governors Named To FINRA Board, Stockbroker Fraud Blog, August 21, 2013
Please contact our institutional investor fraud law firm today. Your initial case assessment with The SSEK Partners Group is free.