Without admitting or denying the findings, FINRA consented to the SEC’s order requiring it to cease and desist from committing or causing future violations of Section 17(a) of the Securities Exchange Act of 1934 and Exchange Act Rule 17a-1, and to comply with the undertakings described above.  In determining to accept FINRA’s settlement offer, the Commission considered remedial acts promptly undertaken by FINRA and cooperation afforded the SEC staff.    WOW! The SEC on Thursday ordered FINRA to hire an independent consultant and undertake other remedial measures to improve its policies, procedures, and training for producing documents during SEC inspections. What Went Wrong. The SEC’s Chicago Regional Office conducted an on-site inspection of FINRA’s Kansas City District Office.  During that inspection, certain documents requested by the SEC examiner were altered just hours before the FINRA District Office provided them. In its Administrative Proceeding, the SEC noted that on 8/7/2008 the Director of FINRA’s KC District Office caused the alteration of 3 records of staff meeting minutes just hours before producing them to the SEC inspection staff, making the documents inaccurate and incomplete.  This was the 3rd time during an 8-year period, in which altered or misleading documents were produced by this FINRA Office to an SEC inspector. FINRA Ordered to Improve Internal Compliance Policies and Procedures. In settling the SEC charges, FINRA consented to engage an independent consultant within 30 days that will:

• Conduct a one-time comprehensive review of FINRA’s pols and procedures and training relating to document integrity.
• Assess whether the pols and procedures and training are reasonably designed and implemented to ensure the integrity of documents provided to the SEC.
• Make recommendations for the enhancement of FINRA’s pol and procedures and training as may be necessary in light of the consultant’s review and assessment.

In determining appropriate sanctions, the SEC took into consideration remedial acts promptly undertaken by FINRA and cooperation afforded the SEC staff.   The SEC’s investigation was conducted by Thomas Gargan. For further information, go to:   [SEC PR 11-227, 10/27/11]   and   [SEC Administrative Proceeding File 3-14605, 10/27/11]