InfoBytes Blog
FINRA fines securities firm $9 million over customer protection violations
On January 20, the Financial Industry Regulatory Authority (FINRA) announced it had entered into a Letter of Acceptance, Waiver, and Consent (AWC), which requires a securities firm to pay a $9 million fine for allegedly failing to (i) maintain proper control of excess margin securities it carried on behalf of customers; (ii) store electronic brokerage records in the required non-erasable, “write once, read many” format (known as “WORM”); (iii) disclose potential conflicts of interest when publishing research reports; and (iv) implement and enforce a supervisory system to ensure compliance with federal securities law and FINRA rules. FINRA claimed that among the alleged violations, the firm failed to preserve approximately 18.6 billion records in the required WORM format, which affected applications, “including those related to accounts payable and receivable, fingerprint records, customer account records, general ledger/trial balances, order and trade tickets, trade confirmations, and wire instructions.” According to FINRA, although the firm understood the requirement to store records in WORM format, it allegedly had no supervisory procedures in place to ensure compliance. The firm did not admit nor deny the findings as part of the AWC but has agreed to a censure and will pay the fine. Additionally, the firm is required to certify that it has implemented reasonably designed supervisory systems and procedures to comply with federal securities laws and FINRA rules and requirements.