FINRA hit Workman Securities Corporation of Eden Prairie, MN, with multiple sanctions, including payment of $700K in partial restitution.  The payment was offered to settle FINRA charges it failed to have reasonable grounds to believe that a private placement an entity offered pursuant to Regulation D was suitable for any customer.  The firm received red flags - the entity had financial issues and wasn't timely in its interest payments - but nonetheless continued selling the offering to customers.  FINRA found that the firm: 

• failed to enforce a reasonably effective supervisory system in connection with private placements ("PP's");
• failed to conduct adequate due diligence of the private placements;
•  failed to confirm that its RR's were doing their own due diligence;
• failed to conduct adequate due diligence of PP's other entities offered;
• made cursory reviews of private placement memoranda (PPMs) for offerings;
• failed to investigate red flags or analyze 3rd-party sources of information or take affirmative steps to ensure the information in the offering documents was accurate.

        Alleged Electronic Communications Failures.   Workman Securities allegedly failed to preserve e-communications in a non-rewritable, non-erasable or “WORM” format, as required.  They also used 3rd-party software for storing and retaining e-communications that didn't comply with requirements under SEC Rule 17a-4(f).   Finally, after being informed that its e-storage medium was non-compliant, the firm didn't take adequate remedial action to retain email properly. 

To settle these alleged violations , Workman Securities agreed to:  (i) certify in writing to FINRA that it has established and implemented a new system and procedures for retaining e-communications;  (ii) provide a written report to FINRA describing the pols, procedures and controls established and implemented addressing the integrity of the retention and retrieval process for e-communication, as well as the supervisory system for overseeing preservation of e-communications.   This is FINRA Case #2009018818401.    [FINRA Disciplinary Actions for April 2011]