FINRA Fines BD $750k (Recordkeeping & Supervisory Failures)
FINRA
Introduction
On January 30th, 2026, FINRA fined and censured a Broker Dealer for $750,000 for failing to properly supervise and retain business-related text messages sent by Registered Representatives.
According to FINRA’s Acceptance, Waiver and Consent (AWC), the Firm did not reasonably enforce its own policies restricting business communications to approved, record-retained systems, resulting in widespread recordkeeping and supervisory failures over several years.
Key Takeaways
- What Went Wrong:
- From 2019 through 2023, Registered Representatives used personal text messaging for Firm business, even though the Firm’s policies prohibited it.
- The Firm failed to effectively monitor, prevent, or capture those communications.
- Missing Records:
- FINRA identified at least 3,560 business-related text messages that were not retained. The true number may be higher because many messages could not be recovered.
- Rules Violated:
- FINRA Rule 3110 (Supervision)
- FINRA Rule 4511 and SEC Exchange Act Rule 17a-4 (Books and Records)
- FINRA Rule 2010 (Standards of Commercial Honor)
- Ignored Warning Signs:
- FINRA noted the Firm had prior notice of potential electronic communications issues from earlier arbitration matters but did not take adequate corrective action.
- Outcome:
- The Firm agreed to a censure and $750,000 fine without admitting or denying the findings.
- In 2023, it engaged a consultant, updated policies, enhanced supervision, and expanded training related to text messaging compliance.
Vigilant’s Conclusion
This Enforcement Action reinforces a clear regulatory message: policies alone are not enough.
Broker Dealers must actively ensure that all business-related electronic communications (especially text messages) are captured, retained, and supervised in accordance with FINRA and SEC requirements.
Firms should treat off-channel communications as a high-risk compliance area, regularly test controls, respond promptly to red flags, and adapt supervision as communication practices evolve.
Proactive oversight and on-going monitoring remain essential to meeting regulatory expectations and avoiding costly enforcement actions.