The Financial Industry Regulatory Authority fined Raymond James $2 million for using a system that didn’t properly monitor or review employee emails.
From late 2007 to September 2017, Raymond James’ email review system was “flawed in significant respects,” FINRA said.
The system allowed “millions of emails to evade meaningful review.”
“This created the unreasonable risk that certain misconduct by firm personnel could go undetected by the firm,” FINRA said.
The Wall Street regulator said Raymond James’ lexicon — the combinations of words and phrases used to flag emails for review — “were not reasonably designed to detect certain potential misconduct.”
The firm didn’t devote adequate personnel and resources to the team that reviewed emails flagged by the system, even when the number of emails increased over time, FINRA said.
Instead, Raymond James tried to reduce the number of “false positives” that would need to be reviewed, FINRA said.
The firm “unreasonably excluded” from email surveillance about 1,300 registered representatives . Those reps worked in branches that hosted their own email servers, FINRA said.
Raymond James consented to FINRA’s findings without admitting or denying the charges.
It agreed to conduct a risk-based retrospective review to detect potential violations evidenced in past emails.
FINRA’s enforcement action against Raymond James Financial Services Inc. is here (pdf).
Richard L. Cassin is the publisher and editor of the FCPA Blog.