An Indiana-based broker-dealer was recently censured and fined by FINRA for numerous alleged violations pertaining to supervision of employee email and its electronic record storage facilities.  This disciplinary action continues a recurring FINRA theme of cracking down on firms not following best practices for electronic correspondence and records.

Indiana Merchant Banking and Brokerage Co. accepted FINRA findings regarding its supervision, in that it had:

• failed to evidence any review of incoming or outgoing written and electronic correspondence. 
• failed to review the personal email account of the firm's CCO which he apparently used to conduct business. 
• permitted the CCO to have his personal email address on his business cards, which was a red flag the firm should not have missed.

The firm accepted FINRA findings pertaining to the firm's record retention, in that it had:

• failed to maintain business and internal emails for almost two years.
• failed to store the emails of the CCO's private account used for business.
  
• failed to notify FINRA prior to beginning use of an storage system for its electronic documents.
• failed to file an attestation by at least one 3rd party who had access and the ability to download information from its e-storage media to an acceptable media for such records that are exclusively stored electronically.
• failed to have in place an audit system providing for accountability regarding the inputting of records into the firm's e-storage media, and failed to keep a record of any changes to every original and duplicate record maintained and preserved.
• failed to evidence the disclosure of its privacy notice upon account opening and annually thereafter. 
  

However, the firm did produce for FINRA a privacy policy and procedures - unfortunately, it failed to provide initial, annual and revised privacy notices.

Firm was fined $20,000 - a reduced amount after FINRA considered, among other things, the firm's size, revenue and financial resources.  That said, it was the largest fine ever levied against IMBB, who has previously been fined $4,500 for failing to complete a financial needs analysis and $1,000 for conducting business in Alabama before its state license application was finalized.

This is FINRA Case #2009016067901.   [Disciplinary Action for August 2011]