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Regulatory Sanctions

Broker Overindulges in a Firm's Permission to Use Personal Email

May 8, 2019

by Howard Haykin



Between August 3, 2015 and August 24, 2016 (the "Relevant Period"), a broker used a personal email address to conduct securities business on over 200 occasions, causing Capital City Securities to fail to input, maintain, and preserve required books and records.



I joined Capital City Securities on July 22, 2015; due to technical reasons my corporate email could not be set up in a timely manner. A corporate financing materialized very quickly and I was instructed to use my personal email temporarily and to forward all relevant emails to my CEO to insure proper record keeping. My corporate email was eventually set up on August 3, almost 2 weeks later and the financing closed on August 7. Unfortunately, a small number of people that worked on the transaction continued to send emails to my personal account for a short period of time even though I asked them to use my new corporate account. At no time did I ever intentionally circumvent my compliance department or attempted to hide any information from the firm.



The broker agreed to pay a $5K fine and serve a 20-day suspension to settle FINRA charges that he violated FINRA ‘Books and Records’ Rule 4511 and FINRA Rule 2010.



FINRA's account of this case seems more plausible. However, I can accept the broker’s explanation that he received temporary permission to use a personal email account for what essentially was a 2-week corporate finance deal. Yet, according to FINRA, the broker continued to conduct securities business on his personal email account for a full 12 months after the deal closed - and failed (chose) not to forward all relevant emails to Capital City as per the instructions he was given. Apparently, this veteran broker, with 31 years’ experience, couldn't be bothered with such trivial matters.



FINANCIALISH TAKE AWAYS.    How, then, is a firm supposed to convince a veteran broker to discontinue using his/her personal email to conduct securities business? The risk of a FINRA sanction won't do the trick because few individuals are ever sanctioned for this violation. And when FINRA does sanction someone, the fines and suspensions are relatively light in nature.


It would seem that the onus is on a designated compliance officer or firm supervisor. Using the above scenario, the designated individual might have tried to repeatedly remind this broker to discontinue his temporary use of the personal email account for firm business - or else continue forwarding such emails to the firm for review and retention. Ultimately, after a month or so, if it's discovered that the broker was still using his personal email account, then some form of internal disciplinary action, including a fine, might be in order.


Eventualy, most individuals respond to such annoying reminders and become compliant.



This case was reported in FINRA Disciplinary Actions for April 2019.

For further details, go to ...  FINRA Disciplinary Actions Online, and refer to Case #2016048223001.