A recent FINRA disciplinary action sends a strong message to broker-dealers that the development of their compliance systems—particularly with respect to email review and retention—must keep pace with the growth of their businesses.
FINRA fined a member firm for significant failures in its email system that prevented it from accessing hundreds of millions of emails, and from reviewing tens of millions of other emails over an approximately six-year period. Among other things, the inadequate systems and procedures caused the firm to provide incomplete responses to email requests from regulators, and also likely affected the firm’s production of emails in arbitrations and private actions.
FINRA, which has a strong focus on the obligation of firms to report internal findings of compliance violations under Rule 4530, also chided the firm for failing to be fully candid when it reported the email lapses. FINRA also noted a breakdown of the firm’s internal audit processes in following through on preliminary audit findings about its email systems.
To read our client alert on this FINRA action, click here.