The federal government is not known for keeping up with newer technologies. However, texting and other forms of electronic communication have been around long enough that there are plenty of regulations in place to address the potential that confidential client information can be sent via decidedly unsecured platforms and without retaining records of the communications as required.
This is a violation of multiple securities laws and recordkeeping rules. FINRA is taking notice.
Veteran financial advisor sanctioned for texting client documents, lying to authorities
Case in point is a financial advisor with the retail brokerage firm Edward D. Jones & Co. She was suspended for 15 months and fined $15,000 by FINRA for texting multiple client documents to a colleague over approximately six months on her personal cellphone. Making matters worse, FINRA says the advisor falsely denied the allegations to its investigators and also in writing to the agency.
The advisor’s employer discovered the violations and reported them to FINRA, as required by the agency. It’s not the only industry leader to face investigations over violations of recordkeeping rules. It joins Well Fargo, Raymond James and others. Last year, the SEC levied charges against 16 securities and investment companies for not properly preserving their electronic communications. They reached an agreement to pay over $1 billion in combined penalties.
The SEC and FINRA have been stepping up actions against securities companies and their employees for playing fast and loose with client and other confidential communications and not using the appropriate recordkeeping protocols to retain them for auditing and regulatory purposes. Consequently, firms are in turn being proactive in putting stronger, more comprehensive rules in place and taking action against employees who violate them.
The Edward Jones employee isn’t the first – or even the first veteran financial professional – at the company to face consequences for violating regulations regarding texting. However, her suspension by FINRA is longer than that faced by those at other companies with similar violations. Lying to federal investigators, as noted, is only going to make things worse. Such actions can come with significant penalties – including prison time.
Any company that is dealing with an employee who has violated its policies and, in turn, potentially placed them in the middle of an SEC or FINRA investigation needs experienced legal guidance to minimize their own exposure. If you have questions or need guidance, contact the attorneys at Ford O’Brien Landy LLP.
Source: AdvisorHub, ” FINRA Benches Edward Jones Lifer For Texting Client Info, Misleading Investigators,” June 2, 2023