[ by Howard Haykin ]

FINRA lowered the boom on 5 affiliates of  Groep N.V., collectively charging them with failing to retain or review millions of emails for periods ranging up more than 6 years. Each of the firms is an indirect subsidiary of ING Groep N.V.,and they are:  (i) Directed Services, LLC; (ii) ING America Equities, Inc.; (iii) ING Financial Advisers, LLC; (iv) ING Financial Partners, Inc.; and, (v) ING Investment Advisors, LLC.

Profiles of the Respondents.  

Directed Services, LLC.  DSL, a FINRA member since 1988, is a wholesale broker-dealer engaged primarily in the underwriting and distribution of certain variable annuity products issued by ING insurance affiliates.  DSL employs 247 registered reps ("RRs") and 26 non-registered support employees. 

ING America Equities, Inc.    INGAE, a FINRA member since 1994, is also a wholesale broker-dealer engaged primarily in the underwriting and distribution of certain variable annuity products issued by ING insurance affiliates.  It conducts no retail business.  INGAE employs 194 RRs and 69 non-registered support employees.

ING Financial Advisers, LLC.   IFA, a FINRA member since 1993, is also a wholesale broker-dealer engaged primarily in the underwriting and distribution of certain variable annuity products issued by ING insurance affiliates.  In addition, it maintains a retail sales force of about 750 RRs who were independent contractors selling insurance products issued by ING insurance affiliates and other 3rd-party entities.  IFA currently employs 840 RRs and 65 non-registered support employees.

ING Financial Partners, Inc.     IFP, a FINRA member since 1968, is a retail broker-dealer involved in the sale of general securities.  IFP has 3,397 RRs and 1,337 non-registered support employees.  Most of the RRs operate as independent contractors out of small or single-person branches. 

ING Investment Advisors, LLC.   IIA, a FINRA member since 1969, is a broker-dealer and provides support for recordkeeping and other related services for ING's retirement service business.  IIA has 42 RRs who are not employees of IIA but who are Minnesota state employees.  IIA currently has 169 RRs and 15 non-registered support employees.  Most of the RRs operate as independent contractors out of small or single-person branches.
 

FINRA Findings and Allegations.   This case involves violations of the supervision and email retention requirements at the 5 affiliated firms over an extended period of time.  The violations arose from the failure of the firms to retain and review emails over a period of years.  As a result of these failures, millions of emails, affecting hundreds of employees, were either not retained, not reviewed, or not timely reviewed for periods ranging from 2 months to more than 6 years.

FINRA found that the firms failed to properly configure hundreds of employee email accounts to ensure that the emails sent to and from those accounts were retained and reviewed at various times between 2004 and 2012.

In addition, ...

• 4 of the firms failed to set up systems to retain certain types of emails -
  • such as e-mails using alternative email addresses, emails sent to distribution lists, emails received as blind carbon copies, encrypted emails and "cloud" email (emails sent through 3rd-party systems).
• As a result, e-mails sent to and from hundreds of employees and associated persons were not retained; and because the emails were not retained, they were not subject to supervisory review.

In addition, ...

• four of the firms failed to review millions of e-mails that the firms' email review software had flagged for supervisory review.
• At various times between January 2005 and May 2011, nearly 6 million emails flagged for review went unreviewed by supervisory principals because the email review software was not properly configured.

 
Alleged Violations Committed and Sanctions Imposed.   FINRA found that the firms violated the recordkeeping provisions of the federal securities laws and FINRA rules, and supervisory requirements under FINRA rules.
 
The five firms agreed to settle FINRA charges with a combined $1.2 million fine.  The firms agreed to conduct a comprehensive review of their systems for the capture, retention and review of email, and to subsequently certify that they have established procedures reasonably designed to address and correct the violations.

FINRA's Departments of Enforcement and Member Regulation conducted the investigation.

For further details, go to:  [FINRA News Release, 1/19/13] and [FINRA AWC 2012031270301].