September 29, 2022

Broker-Dealer Settles Charges for Failing to Preserve Business-related Texts

A broker-dealer settled FINRA charges for failing to preserve employees' business-related text messages. The settlement was part of a larger joint agency sweep to assess compliance with recordkeeping and supervision requirements related to "off-channel" communications involving employees' personal devices (see previous coverage).

FINRA found that the broker-dealer failed to reasonably supervise its employees' business-related communications, which resulted in multiple employees communicating outside the firm's approved communication platforms. FINRA found that the firm failed to obtain, and in turn preserve, those communications. Further, FINRA determined that employees in more senior positions engaged in these prohibited activities, including two employees who, despite being prohibited from communicating at all, sent and received messages on their personal phones.

As part of the settlement, the broker-dealer agreed to (i) a censure, (ii) a civil monetary penalty of $1.5 million and (iii) undertakings to revise its supervisory policies regarding employee communications. The two employees each agreed to (i) a 30-day suspension from association with any FINRA-registered firm and (ii) a civil monetary penalty of $15,000.

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