[ by Howard Haykin ] A St. Paul, MN, broker-dealer agreed to settle FINRA charges that it failed to comply with FINRA's email retention requirements - in what appears to be just another careless, unnecessary fine involving email to and from firm customers. Background Info on Respondent Firm. AEI Securities, Inc., a FINRA member for 40 years, having registered in April 1972.  AEI is a wholesale distributor of the securities issued by its affiliate, AEI Capital Corporation.  During the relevant time period, AEI employed between 6 and 9 registered persons, 2 of whom operated in locations away from the main office in St.Paul, MN. FINRA Findings and Allegations. During a 4-year period, from at least 8/4/07 to 10/14/11, AEI allegedly failed to retain all e-mail correspondence related to its business as a broker-dealer sent to or received by its registered employees.  Such conduct would violate NASD Rules 3110 and 2110, FINRA Rule 2010, Section 17(a) of the Securities Exchange Act of 1934 (the "Exchange Act") and Rule 17a-4 promulgated thereunder. Over the relevant 4 years, AEI apparently only retained those incoming and outgoing emails that were spot-checked weekly for compliance purposes.  The test sample represented nearly 20% of all incoming and outgoing e-mail for its 6-to-9 registered reps.  The firm printed and kept hard copies of the spot-checked emails in a correspondence file for 3 years. What the firm did wrong, in the regulators' eyes was that it failed to maintain or preserve all applicable incoming and outgoing e-mail correspondence for those 3 years. FINRA Sanctions. AEI Securities agreed to pay a $20K fine.

[C-I Note: Unless we missed further further details, our conclusion is that, in this non-complex case, firms must retain for at least 3 years every incoming and outgoing email between registered persons and customers or potential customers - not just the ones that those subject to review.  At least the firm knew the 3-year retention period.

What's disturbing about this case is that AEI violated a requirement that is clearly and simply detailed in the rulebooks - and the fine was unnecessary because there's no reason for this kind of violation.  Probably should "chalk it up" to someone's negligence when preparing the firm's WSP manual.]

For further details, go to [FINRA Disciplinary Actions for August] and [FINRA AWC #2011025483201].