A brokerage firm agreed to settle FINRA charges for (i) failing to retain records of business-related emails, and (ii) failing to establish and maintain a sufficient supervisory system.

According to the Letter of Acceptance, Waiver and Consent, Advisory Group Equity Services Ltd. ("AGES") neglected to retain the business-related emails of roughly 70 newly hired representatives. FINRA also said that many of those representatives improperly continued to use their prior firm email addresses after becoming employees at AGES.

To settle the charges, AGES agreed to a censure, and to pay a fine of $20,000.

Commentary

This enforcement action should serve as a warning that firms can violate Exchange Act Rule 17a-4 and FINRA Rule 4511 by failing to keep records of items that they did not know existed. Firms face many challenges in ensuring that required records of communications are retained, particularly with respect to communications made from cell phones, personal emails, or, as was the case here, emails from previous firms. Firms should consider limiting what devices employees are permitted to make business communications on, so as to simplify the record retention process.

As this case shows, merely having formal policies regarding electronic communications and requiring employees to agree to follow such policies is not sufficient on its own. To ensure that employees are complying with such polices and that required records are being retained, firms should establish robust supervisory systems and perform frequent reviews.

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