Agrees to pay $1.2M to close Finra enforcement action; five affiliates allegedly failed to retain millions of messages
Five ING Groep N.V. affiliates agreed to pay $1.2 million to Finra to settle allegations they failed for six years to retain — and in some cases, review — millions of emails to and from brokers.
The Financial Industry Regulatory Authority Inc. said electronic messages sent to hundreds of employees and associated persons weren't kept and, therefore, were not properly reviewed. Four ING affiliates also failed to review millions of emails between January 2005 and May 2011 — even though the messages had been flagged for review by the firms' compliance programs. Finra claims the software wasn't configured correctly.
“Email retention and review continues to be an important regulatory responsibility and issue of concern for Finra,” said Brad Bennett, Finra's enforcement chief.
As part of the settlement, ING Financial Advisors LLC, ING Financial Partners Inc., ING Investment Advisors LLC, Directed Services LLC, and ING America Equities Inc. neither admitted nor denied the allegations.
According to Finra, four of the firms failed to set up systems that archived certain types of emails, including those using alternate email addresses, any messages sent to distribution lists, emails received as blind carbon copies and those sent through third-party systems.
ING issued a statement noting that, while the archiving issues did not affect customers, the affiliates had informed Finra about the lack of oversight in October 2010.
“The broker-dealers also undertook an extensive internal review of their policies, procedures and systems, and have cooperated fully with Finra's investigation,” the company said. “As a result, the impacted broker-dealers have engaged in significant efforts to improve their email retention and supervisory practices.”
Patrick Burns, president of Advanced Regulatory Compliance, said email procedures and policies have been an area of focus for Finra for the past five years since certain legal cases and the Securities and Exchange Commission ”recognized that there's interesting stuff in emails.”
Regulators believe that firms may have an ability to better supervise the practices of registered representatives if they can supervise their emails, Mr. Burns said.
