The Financial Industry Regulatory Authority has fined Benjamin F. Edwards & Co., Inc. $750,000 for failing to supervise its employees' use of text messages and failing to preserve and review reps' business-related texts.
According to FINRA's order, between at least October 2019 and December 2023, the firm's written supervisory procedures generally prohibited the business use of text messaging except those sent or received through firm-approved software that would capture and preserve the messages.
"The firm had no process or procedures, written or otherwise, for monitoring for compliance with its text messaging policies," the order states.
Despite being prohibited from texting except through the firm-approved software, registered reps of the firm, "including at least one senior executive, used text messaging for business-related communications through unapproved means," the order states.
During the time period, the BD failed to obtain or preserve all business-related text messages at the time they were exchanged.
Although the number of messages is unknown, during this time period, at least five registered reps, including one senior executive, "sent and received at least 3,560 text messages to communicate about firm business through unapproved text messaging applications on their personal devices," according to the order.
"These text messages involved, among other things, receiving investment directives and sensitive personal information from customers and giving investment advice to customers," the order continues. "Benjamin Edwards was able to recover certain of these text messages during FINRA's investigation."
Between November 2018 and October 2019, the firm failed to comply with certain discovery obligations in an arbitration brought in FINRA's Dispute Resolution form, according to the order. Discovery sanctions were imposed against the firm in October 2019, but the firm failed to take reasonable steps to comply with its obligations to supervise, preserve and review business-related communications despite this red flag, FINRA said.
The matter originated from FINRA's review of a January 2022 arbitration award.
Benjamin F. Edwards & Co. is a full-service broker-dealer based in St. Louis, with about 560 registered reps across over 100 branch offices.
In May 2023, Benjamin Edwards retained a consultant to review the firm's supervision of text messaging.
Based on the consultant's recommendations, by December 2023, the order states that the firm had, among other things:
- strengthened its WSPs concerning text messaging;
- required regular certifications concerning its text messaging policies;
- increased communications and training concerning its text messaging policies; and
- strengthened its electronic communication monitoring systems.
Benjamin Edwards accepted FINRA's findings without admitting or denying them.
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