Email Archiving Is The First Line Of Defense From Regulation Penalties

08 Jan 2021 - sj, tags: compliance, news

Emails may contain evidence that can save you from FINRA fines. Only if you can present the relevant emails. A broker firm avoided penalties, because they had an email archive that preserved important emails that could prove their innocence.

“FINRA fined a financial advisor $5,000 because she exceeded the scope of her approved outside investment advisory business by charging asset-management fees.

The findings stated that the financial advisor in question created her own registered investment adviser (RIA) firm – of which she was the sole owner and employee – communicating via email to her broker-dealer that this business would only charge hourly fees and fixed, one-time financial planning fees. The firm approved her outside business based on these representations.

Subsequently, the advisor began offering a new service to her advisory clients where she would charge an annual 1.5% asset-management fee for managing variable annuity subaccounts. Not only did this advisor fail to disclose this new service and the associated fees to the firm, she allegedly made inaccurate statements in her annual compliance questionnaires to the firm via email.

While the financial penalties in this particular instance were not catastrophic, it is noteworthy that the penalties applied only to the financial advisor, with the advisor’s broker-dealer escaping unscathed. Why? In this case, the broker-dealer’s email archives were sufficiently comprehensive and clear in shielding the firm from the financial advisor’s outside business activities.”

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