Scottrade, Inc. agreed Monday to pay $2.6 million to the Financial Industry Regulatory Authority for failing to retain “a large number” of securities-related electronic records in the required format, and for failing to retain certain categories of outgoing emails.
FINRA said that Scottrade also did not have a reasonable supervisory system in place to achieve compliance with certain Securities and Exchange Commission and FINRA books and records rules, which contributed to its record-retention failures.
Federal securities laws and FINRA rules require that business-related electronic records be kept in non-rewritable, non-erasable format (also referred to as “Write-Once, Read-Many” or “WORM” format) to prevent alteration.
WORM-formal rules, the SEC has stated, are an essential part of the investor protection function because a firm’s books and records are the “primary means of monitoring compliance with applicable securities laws, including antifraud provisions and financial responsibility standards,” FINRA states.
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Scottrade neither admitted nor denied the charges, but consented to the entry of FINRA’s findings.
From January 2011 to January 2014, FINRA states that Scottrade did not have centralized document-retention processes or procedures for all firm departments to follow. “Further, no one at the firm was charged with responsibility for ensuring a consistent document-retention process, fully compliant with the record-retention rules, including the requirement that all records be retained in WORM format.”