The Financial Industry Regulatory Authority has fined a broker-dealer $100,000 for failing to reasonably supervise the use of an approved electronic instant messaging platform provided by a vendor and failed to preserve and review certain business-related communications sent and received through the platform.
Beginning in January 2020, Investment Placement Group, a firm with about 60 registered reps headquartered in San Diego, permitted employees to use a vendor-provided electronic instant messaging platform for business purposes.
"However, between January 2020 and November 2022, IPG failed to establish, maintain, and enforce a supervisory system, including written supervisory procedures (WSPs), reasonably designed to achieve compliance with the firm’s obligation to preserve and review business-related communications sent and received through the approved messaging platform," FINRA's order states.
In January 2020, the firm engaged a third-party vendor to capture the messages that its employees sent and received so that the firm could preserve and review them.
"In order for the archiving service to capture messages sent and received by an employee through the messaging platform, the employee’s personal device had to be connected to the archiving service," the order states.
IPG, however, "did not take reasonable steps to verify that its employees’ devices were in fact connected, and remained connected, to the archiving service, and that employees’ messages sent and received through the messaging platform were in fact being captured by the archiving service," according to FINRA.
"Moreover, the firm’s WSPs did not address the use of the messaging platform or describe how principals at the firm should verify that employees’ devices were connected, and remained connected, to the archiving service," the order continued. "During the relevant period, the IPG employees who were authorized to use the messaging platform either were never connected to the archiving service or were connected for only a portion of the time."
An unknown number of business-related messages of employees were, therefore, never preserved or reviewed by the firm.
Moreover, the order states that IPG "was unable to produce all messages responsive to a FINRA request in connection with the review of a customer complaint."
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