Failure of Properly Implementing WSPs | FINRA Fine
FINRA
Introduction
A FINRA Firm was recently disciplined for failures to properly implement WSPs that would adequately review the electronic communications of its registered representatives. Without admitting or denying the claims made by FINRA, the Firm accepted censure, a $45,000 fine, and mandated steps towards remediation.
What Happened?
According to FINRA:
- From November 2017 to November 2022, the Firm did not have reasonable WSPs that could realistically flag communications that have the potential to be problematic.
- The WSPs lacked a description of:
- Which personnel would be responsible for email review.
- How often email reviews should be performed.
- The methodology or sample sizes required to be considered adequate.
- What terms or phrases would be searched for during review.
- The escalation process if any issues were found.
- The Email Reviews that took place were inadequate
- The Firm’s own name was used as a keyword, which appeared in almost every email.
- Only 0.26% of emails sent or received between November 2017 and December 2021 were reviewed.
Vigilant’s Conclusion
The proper recordkeeping and review of electronic communications has been a major focus for regulators.
There is an expectation that Firms have both created adequate WSPs regarding electronic communication and properly implementing them.
There are cost-effective technology solutions to help Firms properly record and review all electronic communications.
Vigilant can provide gap analysis of your compliance program’s current policies and procedures, and help your Firm bring its processes up to industry standards. We help clients find cost-effective solutions to help reduce their risk of potential regulatory headaches. Reach out to us today if you have any questions or concerns.