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In Transition, a Broker-Dealer Forgets to Check Off All the Boxes
by Howard Haykin
WHAT WENT WRONG ACCORDING TO FINRA. During a routine firm examination, FINRA staff found that AGES – even with FINRA’s forewarnings - failed to capture the business-related emails of a number of the newly hired representatives for retention and review – as many of the reps continued to use their prior firm email addresses after they joined AGES. And, needless to say, those email addresses were not approved or supervised by AGES.
From February 2017 through August 2017, at least 11 reps sent at least 2,000 emails from their former firm email addresses to their securities customers. Among other things, the emails dealt with investment- and/or account-related information such as: (i) the purchase and sale of bonds and stocks; (ii) the forwarding of account-opening documents, account transfer forms and trade confirmations; and, (iii) account balance information. NONE OF THOSE EMAILS WERE CAPTURED FOR CONTEMPORANEOUS REVIEW OR RETENTION.
AGES compounded its errors by failing to detect critical red flag alerts. In several instances, new reps used their former firm email addresses to exchange emails with approved AGES email addresses. This, according to FINRA staff, should have alerted the Firm to the fact that a number of its new reps were still using their former firm email addresses to conduct securities business - however, AGES never noted the use of the old, unsupervised emails.
Finally, while AGES required associated persons to sign attestations that they would abide by the Firm's policies regarding e-communications, which required use of Firm-approved email addresses, at least 20 new reps never completed the email attestation when they joined AGES.
This case was reported in FINRA Disciplinary Actions for March 2019.
For further details, go to ... FINRA Disciplinary Actions Online, and refer to Case #2017052216701.