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October 27, 2011 at 09:35 AM
Fed up with receiving altered documents, the Securities and Exchange Commission on Thursday ordered the Financial Industry Regulatory Authority (FINRA) to hire an independent consultant and undertake other remedial measures to improve its policies, procedures and training for producing documents during SEC inspections.
The SEC’s order found that on Aug. 7, 2008, the Director of FINRA’s Kansas City District Office “caused the alteration of three records of staff meeting minutes just hours before producing them to the SEC inspection staff, making the documents inaccurate and incomplete.”
The SEC order requires FINRA to “cease and desist from committing or causing future violations of Section 17(a) of the Securities Exchange Act of 1934 and Exchange Act Rule 17a-1.”
According to the SEC, FINRA provided altered documents requested by the SEC during an inspection at the Kansas City office, and not for the first time, despite the fact that it had previously worked on improving compliance after two other events in which document integrity had been questioned.
That spurred the disciplinary action ordering compliance.
Gerald Hodgkins, associate director of the SEC’s Division of Enforcement, said in a statement, “The law requires FINRA to produce the documents the SEC seeks in its examinations in complete and accurate form. Although FINRA has previously taken steps to improve compliance, those enhancements did not go far enough to prevent the document production failure that occurred in its Kansas City District Office. This order will help ensure that FINRA effectively addresses the weaknesses in its training as well as its policies and procedures.”
