Select Findings and Fines Related to SEC Record Retention Rule 17a-4
BOK failed to maintain thousands of brokerage record in a non-erasable, non-rewriteable format, resulting in a fine of $175,000. The findings stated that the firm failed to maintain in WORM format approximately 730,000 order tickets and approximately 2,000 financial records, including accounting ledgers and Financial and Operational Combined Uniform Single (FOCUS) reports, during the relevant period. The findings also stated that the firm failed to implement an audit system regarding retaining and preserving electronic records. The findings also included that the firm failed to establish, maintain and enforce written supervisory procedures (WSPs) reasonably designed to achieve compliance with Rule 17a-4 of the Securities Exchange Act of 1934.
Acorns Securities were in possession of approximately ten million electronic records that were not preserved in WORM format. The deficiency affected 22 categories of records, including more than 8,800,000 trade confirmations, 322,000 statements, and 407,000 instant messages. They were also penalized for failing to notify their designated examining authority 90 days prior to using electronic records, and failing to establish a proper auditing system. The firm ended up with more than $175,000 in fines for the violative acts.
Wells Fargo Securities, LLC and Wells Fargo Prime Services, LLC were fined $4,000,000 for failing to preserve broker-dealer and customer records in WORM format. The violation occurred across multiple systems and affected 35 categories of electronic-broker dealer records. During the relevant period, FINRA ruled that Wells Fargo had not done enough to maintain its books and records in a secure manner after an error involving one of its data repositories. The firm also received fines for not implementing an auditing system, or obtaining an attestation from third-party vendors.
LPL consented to paying fines totaling $750,000 due to clear violations of Rule 17a-3 and 17a-4, which resulted from 18.3 million electronic records not being kept in WORM format from December 2010 to November 2015. FINRA identified two WORM deficiencies in the relevant period; the first occurred when LPL’s BranchNet communications, which were part of an internal system designed to provide advisers with alerts on administrative or compliance issues, were not properly retained. The second deficiency occurred when the firm failed to retain 77 accounts payable check registers and 154 commission check registers.
PNC Capital Markets
PNCCM was found to have failed to preserve 1.9 million electronic records related to its brokerage business, resulting in a fine of $500,000. The deficiency spanned a wide range of record categories, including order tickets, trade confirmations, blotters for securities, stock records and ledgers. They were also penalized for failing to provide a 90-day notice to their examining authority prior to employing electronic storage media, and failing to implement an audit system during the relevant period.
From August 2008 to December 2016, RBS Securities failed to preserve over 14 million brokerage records in WORM format that were pivotal to the firm’s business. Due to a configuration error within one of their Microsoft servers in May of 2015, 5,849 chat messages were not exported and logged in their retention system. The firm also failed to implement an auditing system during the relevant period. They were required to pay over $2 million in fines
Integrated Trading & Investments
Integrated failed to institute an automated system for reviewing, supervising and retaining their business emails. During the relevant period, employees were instructed to forward any business emails sent or received from their personal email addresses to the firm’s CCO for storage. Many emails were not forwarded, and as a result were not maintained and preserved in WORM format between January 2012 and July 2016, serving as the foundation of FINRA’s disciplinary actions against them. The firm consented to paying a $5,000 fine for their oversight.