The Financial Industry Regulatory Authority levied a $2.6 million fine against Scottrade on Monday for failing to retain more than 168 million outgoing emails and record email communications in the proper format.
According to FINRA, from January 2011 to January 2014 Scottrade failed to put in place centralized, firm-wide policies and procedures around document retention. Also, instead of saving all documents in the format required by securities laws, several of Scottrade’s departments saved files in various formats to a restricted shared drive.
FINRA rules require firms to save all documentation in a non-rewritable, non-erasable format (also known as "write-once, read-many" or "WORM" format), which is used to prevent alteration, according to the regulator.
“Firms must maintain sound supervisory systems and procedures to ensure the integrity, accuracy, and accessibility of electronic books and records,” Brad Bennett, executive vice president and chief of enforcement, said in a statement Monday.
FINRA also found that Scottrade failed to save more than 168 million outgoing emails. According to the regulator, the emails at issue were those automatically generated by the firm or its third-party service providers around issues like margin call notices, address change notifications and failed password attempt notifications.
A spokeswoman for the firm said Scottrade undertook an extensive records retention audit in early 2014 and self-reported its findings to FINRA, immediately taking steps to strengthen its document preservation system.
“We are confident these changes have fully updated our processes and controls,” said Shea Leordeanu, vice president of public relations.
But the firm failed to preserve a large number of key securities business electronic records in the required format because of its non-compliant system, FINRA claims.
Scottrade agreed to the $2.6 million fine without admitting or denying the charges.