Just before the long holiday break, the Financial Industry Regulatory Authority (FINRA) announced that it fined 12 banks and brokerage firms a total of $14.4 million for failing to adequately protect information in electronic broker-dealer and customer records. The FINRA announcement explained:
"... at various times, and in most cases for prolonged periods, the firms failed to maintain electronic records in “write once, read many,” or WORM, format, which prevents the alteration or destruction of records stored electronically... Federal securities laws and FINRA rules require that business-related electronic records be kept in WORM format to prevent alteration. The SEC has stated that these requirements are an essential part of the investor protection function... FINRA found that each of these 12 firms had WORM deficiencies that affected millions, and in some cases, hundreds of millions, of records pivotal to the firms’ brokerage businesses, spanning multiple systems and categories of records... each of the firms had related procedural and supervisory deficiencies affecting their ability to adequately retain and preserve broker-dealer records stored electronically. In addition, FINRA found that three of the firms failed to retain certain broker-dealer records the firms were required to keep under applicable record retention rules. In settling this matter, the firms neither admitted nor denied the charges, but consented to the entry of FINRA's findings."
The firms fined and the amounts for each:
"Wells Fargo Securities, LLC and Wells Fargo Prime Services, LLC were jointly fined $4 million. RBC Capital Markets LLC and RBC Capital Markets Arbitrage S.A. were jointly fined $3.5 million. RBS Securities, Inc. was fined $2 million. Wells Fargo Advisors, LLC, Wells Fargo Advisors Financial Network, LLC and First Clearing, LLC were jointly fined $1.5 million. SunTrust Robinson Humphrey, Inc. was fined $1.5 million. LPL Financial LLC was fined $750,000. Georgeson Securities Corporation was fined $650,000. PNC Capital Markets LLC was fined $500,000.
In September, Wells Fargo bank paid $185 million in fines to settle charges of alleged unlawful sales practices during the past five years. LPL Financial had several data breaches during 2007 to 2009.
For readers seeking more information, the FINRA announcement includes links to the settlement agreements.