The Financial Industry Regulatory Authority has fined Raymond James Financial Services $2 million for failing to properly review email communications over a nine-year period.
The regulator said that the firm’s system for flagging emails for review was not adequately designed to detect misconduct by firm personnel. And it left millions of emails at risk of not being as deeply reviewed as they should have. The firm also didn’t have enough staff to effectively supervise email communications, FINRA said.
“The combinations of words and phrases—otherwise known as the ‘lexicon’—used to flag emails for review were not reasonably designed to detect certain potential misconduct that Raymond James, in light of its size, structure, business model, and experience from prior disciplinary actions, knew or should have anticipated would recur from time to time,” FINRA said.
The firm also failed to test the email surveillance system on a regular basis.
“The firm’s primary focus was reducing the number of ‘false positives’ that would need to be reviewed rather than ensuring that the system was effectively identifying all potentially problematic categories of emails,” the regulator said.
Also, some employees who serviced customer brokerage accounts were unreasonably excluded from email surveillance, and the firm didn’t apply its entire lexicon to the 1,300 advisors in branches that hosted their own email servers.
Raymond James will conduct a risk-based retrospective review to detect potential violations in past emails.
