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NEWSLETTERS & ALERTS
SEC Fines Broker-Dealer for Over Email Retention
In an Administrative Proceeding, Loop Capital Markets agreed to pay a $25K fine to settle SEC charges that it failed to preserve emails transmitted by a senior registered rep.
BACKGROUND. Loop Capital Markets, a Chicago, IL-based broker dealer, has been a FINRA member firm since 2004.
According to its web site, the firm began as a municipal bond firm with 6 employees in 1997. Today, Loop Capital provides full-services investment banking, brokerage and financial consulting services, with 175 employees operating out of 22 offices. The firm has no prior relevant disciplinary history.
SEC FINDINGS. In October 2013, SEC staff requested information from Loop Capital, including electronic communications, relating to a finance transaction conducted by the firm. Loop Capital could not comply with the request because, as it turned out, a senior Registered Rep had communicated the correspondence using her personal email account. HERE ARE THE DETAILS.
During 2011 and 2012, the Registered Rep used her personal email to conduct business of Loop Capital involving a finance transaction. Even though she had access to a Loop Capital email account, the Registered Rep deliberately used her personal account to transmit emails in order to avoid review and surveillance by Loop Capital. The Registered Rep also did not provide copies of the emails to Loop Capital to preserve such communications.
► Loop Capital’s policies required employees to use Loop Capital servers to communicate about Loop Capital business, and prohibited employees from using personal forms of electronic communication to communicate such business.
► Loop Capital also relied on annual compliance attestations to monitor its employees’ adherence to its policies, including the firm’s policy prohibiting the use of unauthorized methods of electronic communication.
► Notwithstanding those 'controls', the firm had yet another opportunity to learn about those emails.
In 2011, at least one senior employee at Loop Capital was aware that the Registered Rep was not complying with the firm’s policy prohibiting use of personal email for work purposes. The Registered Rep sent several emails about the finance transaction to the Loop Capital employee using her personal AOL email account (apparently these emails were either deemed irrelevant for the SEC's review or they were simply not retained by the senior employee).
It was only after Loop Capital was unable to produce the communications requested did the SEC staff learn about the existence of additional emails transmitted through the Registered Rep’s personal email account responsive to the staff’s record request.