FINRA Settles Charges of Record Retention Failures with Discount Retail Brokerage Firm

FINRA settled charges with a discount retail brokerage firm of failing to (i) retain a large number of securities-related electronic records in the required format; (ii) to retain certain categories of outgoing emails; and (iii) to have a "reasonable supervisory system in place to achieve compliance with certain SEC and FINRA books and records rules, which contributed to its record-retention failures."

Specifically, FINRA found that:

• the firm did not have centralized document-retention processes or procedures for all firm departments to follow;
• the firm did not give any member of the firm the responsibility to ensure "a consistent document-retention process, fully compliant with the record-retention rules," including the requirement that all records be retained in "a non-rewritable, non-erasable format (also referred to as 'Write-Once, Read Many' ['WORM'] format)";
• personnel in different departments of the firm saved certain documents to a restricted shared drive, which was not WORM-compliant and consequently resulted in the firm's "failure to preserve a large number of key securities business electronic records in the required format"; and
• the firm failed to to copy more than 168 million outgoing emails that were generated automatically by the firm's internal systems or by third-party vendors to the firm's WORM storage device, resulting in the deletion of the emails that included items such as margin call notices, address change notifications and failed password attempt notifications