A recent action taken by the Financial Industry Regulatory Authority against a chief compliance officer shows the importance of reviewing and retaining business-related electronic communications.
The broker-dealer self-regulator recently took action against a CCO failing to retain business emails and using an outside email to conduct business.
In a Smarsh blog, Eversheds Sutherland attorneys Brian Rubin and Amanda Oliveira note that FINRA has shown that it places great emphasis on the review and retention of business-related electronic communication — bringing enforcement actions against reps, compliance officers and firms.
The CCO, Jamie Bennett, who was responsible for the firm’s supervision, retention and review of emails, as well as maintenance of the firm’s books and records, failed to take any steps to review or retain on behalf of the firm representatives’ emails.
Specifically, Bennett ”failed to ensure that the firm captured, reviewed, or retained emails sent and received by one representative, as well as certain business-related emails sent and received by the CCO himself through his outside email address,” Rubin and Oliveira write.
Bennett failed to fulfill the retention and review requirements concerning an investment banking rep associated with the firm through a “doing business as” entity.
“The CCO knew of the representative’s use of a third-party email address associated with the d/b/a. However, the CCO failed to take any steps to review or capture the representative’s use of email through the d/b/a email domain until January 2015. Even then, although he took steps to capture the emails, they could still have been permanently deleted through June 2015,” the Eversheds’ attorneys state.
As to his own emails, Bennett “almost exclusively” used a third-party email account instead of his firm account to conduct firm business, Rubin and Oliveira state.
Bennett was fined $5,000 and suspended for 30 days.
— Check out FINRA Sanctions Rep for Messaging Clients on WhatsApp on ThinkAdvisor.