The Financial Industry Regulatory Authority (FINRA) announced on Wednesday, December 21 that they have fined 12 separate firms $14.4 million for failing to adequately protect customer and broker-dealer records from alteration. They found on multiple occasions that firms failed, often for extended periods of time, to maintain their electronic records in a “write once, read many” (WORM) format which is put in place to prevent the destruction or alteration of electronically stored records. The following firms were fined for their actions:
- PNC Capital Markets LLC: $500,000 fine
- Georgeson Securities Corporation: $650,000 fine
- LPL Financial LLC: $750,000 fine
- SunTrust Robinson Humphrey, Inc.: $1.5 million fine
- Wells Fargo Advisors, LLC, Wells Fargo Advisors Financial Network, LLC and First Clearing, LLC: $1.5 million joint fine
- RBS Securities, Inc.: $2 million fine
- RBC Capital Markets LLC and RBC Capital Markets Arbitrage S.A.: $3.5 million joint fine
- Wells Fargo Securities, LLC and Wells Fargo Prime Services, LLC: $4 million joint fine
FINRA rules and federal securities laws require that these records are kept in the WORM format in order to protect them from tampering and have been called an essential part of the investor protection function by the Securities and Exchange Commission (SEC). FINRA’s Executive Vice President and Chief of Enforcement Brad Bennett commented on the fines:
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“These disciplinary actions are a result of FINRA’s focus on ensuring that firms maintain accurate, complete and adequately protected electronic records. Ensuring the integrity of these records is critical to the investor protection function because they are a primary means by which regulators examine for misconduct in the securities industry.”
Additionally, FINRA discovered that each firm had related supervisory and procedural deficiencies that affected their ability to accurately preserve and retain these electronically stored records, and three of the firms failed to retain certain required records. These firms consented to the entry of FINRA’s findings, but neither admitted nor denied the charges in settling this matter.
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