The Financial Industry Regulatory Authority is ordering 12 firms to pay a collective total of $14.4M in fines over deficiencies involving the way they preserved customer and brokerage firm records. The firms who are subject to these sanctions include:
· RBS Securities (RBS) for $2M
· LPL Financial (LPLA) for $750K
· Wells Fargo Prime Services and Wells Fargo Securities (WFC) for a collective $4M fine
· Wells Fargo Advisors, First Clearing LLC, and Wells Fargo Advisors Financial Network for a joint fine of $1.5M
· RBS Capital Markets Arbitrage and RBC Capital Markets for $3.5M
· SunTrust Robinson Humphrey for $1.5M
· PNC Capital Markets for $500K
Under FINRA rules and federal securities laws, electronic records that are business-related have to be maintained in WORM format so that they cannot be modified. According to the US Securities and Exchange Commission, this is necessary to protect investors because monitoring compliance by firms occurs primarily through their records and books.
The self-regulatory organization contends that these firms’ deficiencies were related to WORM, and they impacted millions, sometime even hundreds of millions of records that were important to their brokerage businesses.
Over recent years, with the increase in the amount of electronic communications and the virtual storage of sensitive financial information, there has been a rise in hacking attempts. As FINRA Enforcement Chief Brad Bennett noted, it is important to make sure that firms keep up complete, accurate, and properly protected electronic records for the sake of investor protection.
The SRO said that all 12 of the firms exhibited related supervisory and procedural deficiencies that impacted their ability to adequately preserve and keep brokerage firm records in electronic storage. Also, said FINRA, three of the brokerage firms did not keep certain records that they were required to preserve.
By settling, the firms are not denying or admitting to the regulator’s charges.
Finra fines 12 firms a total of $14.4M for failing to protect records from alteration, FINRA, December 21, 2016