Broker-Dealer Fined for Inadequate Supervision over Electronic Communications

A broker-dealer settled FINRA charges for failing to "establish, maintain, and enforce a reasonable supervisory system . . . to review electronic communications that its registered representatives sent and received."

FINRA found that the firm did not designate personnel to review communications, nor did the firm's policies indicate how often communications should be reviewed. Additionally, FINRA found that the firm did not have a useful keyword system for flagging emails to be reviewed. FINRA said the firm reviewed emails on essentially a random basis, but only conducted a review of approximately one quarter of 1 percent of emails.

FINRA determined that the broker-dealer violated FINRA Rule 2010 ("Standards of Commercial Honor and Principals of Trade") and Rule 3110 ("Supervision"). To settle the charges, the broker-dealer agreed to (i) a censure, (ii) a civil monetary penalty of $45,000 and (iii) undertakings to remediate its electronic communication review issues.