A San Antonio firm agreed to settle FINRA charges that it failed repeatedly - and in numerous ways - to control its registered reps' incoming and outgoing emails.  Frost Brokerage Services consented to the following FINRA findings:

• firm did not retain internal firm emails for 3 years.
• firm did not retain emails in anon-erasable, non-rewritable format.
• firm used an internally created email retention system that retained email between firm RRs and individuals outside the firm, but did not retain internal email.
• Instead, firm retained internal email on backup tapes, which were archived for less than the required 3-year period.

Firm implemented a new email retention system an outside vendor created to retain RRs' emails.  However:

• for an unknown number of emails there was a difference in the time the RR sent or received the email and the timestamp on the email as saved in the archive of the new email retention system;
• in some instances, the difference was a matter of seconds, and as a result, the timestamps on an unknown number of emails in the archive of the new email retention system differed from the times RRs sent or received those emails.
• while attempting to gather emails in response to a FINRA investigation, firm discovered that, due to a problem with the new email retention system, certain emails were being held in a database of the new system and were not moving to the archive portion of the system.

Firm also performed certain upgrades to the new email retention system in an attempt to move those emails from the database to the archiving portion of the system.  Yet, FINRA found that:

• prior to performing the upgrade, firm did not copy the contents of the database where the emails were being held.
• during the upgrade, a default configuration superseded the customized server configuration that the outside vendor had originally utilized for the system, which resulted in a loss of certain header information when those emails were moved from the database to the archiving portion of the system.
• in a statement submitted to FINRA, the firm reported the problem that resulted in email being ingested in the new email retention system without certain header information.
• new system also malfunctioned during parts of a year, which led to gaps in its email retention and the loss of emails responsive to FINRA’s investigation;
• neither firm nor outside vendor was able to determine thecause of the malfunction or the total number of emails lost as a result of the malfunction.
• firm did not retain or review emails that RRs sent from firm-issued electronic devices to individuals outside the firm.

In addition to the overall deficiencies in the firm's supervisory pols and procedures in the area of electronic communications, the firm failed to establish a supervisory system, including WSPs, reasonably designed to detect and prevent malfunctions in the new email retention system. FINRA Fines and Sanctions. Frost Brokerage Services, received a $200,000 fine and was ordered to certify to FINRA in writing within 120 days that it currently has in place systems and procedures reasonably designed to achieve applicable compliance.  For further details, go to:   FINRA AWC #2008014620601. [FINRA Disciplinary Actions for October 2011.]