Probably like many of you, I read with fascination Melanie Waddell’s story last week about LPL getting fined $9 million by FINRA for failing to save and monitor its reps’ emails. It seems over the past five years, the Boston-based independent broker-dealer’s systems failed to save reps’ emails 35 times, making it impossible for the firm to monitor some advisor emails, allow FINRA auditors to examine some emails, and for LPL to provide some emails to clients who were suing the firm.
OK, that sounded kinda bad, but stuff happens, you know? Especially when it comes to technology. If I got fined every time I lost an email or a file I’d be in trouble. And $9 million for a couple dozen emails? That seemed a little harsh.
So my curiosity was piqued and I read on. It seems LPL’s problem was a bit bigger than I realized: according to FINRA, the firm failed to supervise 28 million emails, let another 80 million emails get “corrupted,” and “failed to maintain access to hundreds of millions of emails.” Yes, you read that right: hundreds of millions of emails.
At this point, I’d pretty much forgotten about the $9 million, as my brain was stuck on the volume of emails. Since FINRA specified these numbers rather than saying LPL lost all its rep emails, and this was only over a five-year period, I went right to the question of how many emails is LPL expected to archive—possibly billions.
Now I’m usually a proponent of more brokerage regulation rather than less—and of increased FINRA oversight to enforce it. But in this case, I have to admit, it seems as if maybe FINRA should lighten up on the accusations and fines, and work with the brokerage firms to find better solutions to what seems to be a huge—and snowballing—problem: even if brokerage firms could afford to keep updating their technology to archive and retrieve the growing volume of emails, how could they possibly “monitor” billions of advisor emails?