South Florida Arbitration & Litigation Lawyer Blog
Integrated Trading and Investments, Inc. (CRD #47730, Huntington Beach, California)
FINRA recently announced that on or about May 21, 2018 Integrated Trading and Investments, Inc. executed an Acceptance, Waiver and Consent in which the firm was censured and fined $5,000. A lower fine was imposed after considering, among other things, the firm’s revenue and financial resources. Without admitting or denying the findings, the firm consented to the sanctions and to the entry of findings that it failed to maintain and preserve certain business-related emails in a non-erasable, non-rewritable format, also known as WORM (write once, read many) format. The findings stated that the firm allowed its registered representatives to use personal email accounts to conduct their securities business and preserved business-related emails using electronic storage media (ESM). Until July 2013, the firm’s representatives were required to forward their business-related emails from their personal email accounts to the personal email address of the firm’s President/Chief Compliance Officer (CCO) for storage. These emails, along with any other business-related emails sent from or received by the CCO’s personal email address were not stored in WORM format. Beginning in July 2013, the firm’s representatives were required to forward business-related emails conducted in their personal email accounts to firm email addresses for storage. The firm’s representatives did not always follow this requirement. As a result, certain of their business-related emails were not maintained and preserved in WORM format. The findings also stated that the firm did not use an automated system for the review and preservation of all business-related emails. Instead, it relied on an “honor system” for registered representatives to manually forward business-related emails, including those with customers, from their personal email accounts to the firm’s CCO (until July 2013) and to business email addresses assigned by the firm (beginning in July 2013). As a result, the firm’s compliance with its review and preservation obligations depended on its representatives’ compliance with this requirement. The firm, however, had no supervisory system or procedures to ensure that its representatives complied with this requirement. The findings also included that because of this deficiency in the firm’s system, business-related emails sent from or received by the personal email accounts of the firm’s representatives that were not forwarded escaped supervisory review. For example, business-related emails using personal email accounts were not forwarded by three registered representatives between April 2012 and July 2013, and by another representative between August 2013 and January 2014. The firm was unable to evidence any review of these emails. FINRA found that between January 2012 and July 2013, the firm did not require the review by another registered principal of emails sent or received by the firm’s CCO and did not otherwise establish a reasonable system for the review of his emails. As a result, the CCO’s emails were not reviewed by another registered principal. FINRA also found that the firm failed to implement and maintain a reasonably
designed system, including written supervisory procedures, for the maintenance and preservation of all business-related emails in WORM format. Based on the foregoing, the firm failed to establish, maintain and enforce a reasonable supervisory system and written supervisory procedures regarding the review and preservation of registered representatives’ business-related emails and failed to review certain business-related emails. (FINRA Case #2016047872901)
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