Introducing Broker Settles FINRA Charges for Failing to Retain Business-related Instant Messages

An introducing broker settled FINRA charges for failing to capture, review and retain business-related electronic communications that were sent and received through representatives' personal cellular telephones via a third-party instant messaging service.

In a Letter of Acceptance, Waiver, and Consent, FINRA found that the firm had certain written procedures prohibiting the use of instant messages for business purposes unless granted permission, but did not have any procedures to ensure that representatives complied with this prohibition, nor any procedures to capture business-related communications sent or received via instant message. Further, FINRA determined that the broker was aware that several representatives were communicating with customers via instant message yet failed to take any action to prevent further violations.

As a result, FINRA found that the broker violated Section 17(a) of the Exchange Act ("Records and Reports") and Exchange Act Rule 17a-4 ("Records to be preserved by certain exchange members, brokers and dealers"), as well as FINRA Rule 2010 ("Standards of Commercial Honor and Principles of Trade"), Rule 3110 ("Supervision") and Rule 4511 ("General Requirements").

To settle the charges, the firm agreed to (i) a censure and (ii) a $50,000 fine.