At a webcast on January 22, lawyers said that the electronic communication issues and the retention of e-mail would be a big part of broker-enforcement by Financial Industry Regulatory Authority and the SEC this year. E-mails are reportedly now a key factor in investigations by the two regulators. Also now subject to retention, supervision, and other requirements are instant messages and any other electronic communications and methods that brokerage firms us to dialog internally, as well as with customers and the public.
Last month, Barclays Capital agreed to pay a $3.75 million FINRA fine for allegedly not keeping all of its electronic messages and improperly storing records in a format that was non-rewritable. Barclays also purportedly did not keep over 3 million instant messages, which violates FINRA and SEC rules, and failed to retain email attachments. Earlier in 2013, LPL Financial (LPLA) was ordered by the SRO to pay $7.5 million for allegedly not adequately supervising e-mails.
Statistics show that electronic communications was the number one enforcement issue for FINRA last year. The self-regulatory organization’s amended Rule 8210 could also lead to additional litigation and enforcement actions over the books and records that it requests from firms and individuals. The change makes clear the degree to which FINRA can inspect and copy the records and books of associated persons and members and gives adjudicators the right to copy and inspect information that are under the control or custody of those that the SRO has jurisdiction over. Due to the fact that FINRA is not a governmental authority, firms are unable to invoke the Fifth Amendment regarding this matter. They also cannot formally oppose a Rule 8210 request to give over the material requested. Doing so can lead to possible disciplinary action.
Read the Full Notice (PDF)
More Blog Posts:
Barclays to Pay $3.75M FINRA Fine for E-mail Retention and Record Preservation Violations, Stockbroker Fraud Blog, December 30, 2013
FINRA Orders LPL Financial to Pay $7.5M Over Allegedly Inadequate Supervision of E-Mails, Stockbroker Fraud Blog, May 23, 2013
FINRA Fines Piper Jaffray $700,000 for E-mail Retention Issues and Other Violations, Stockbroker Fraud Blog, June 7, 2010