FINRA has censured Securities America and fined it $100,000 for making inaccurate and misleading statements to clients via emails.
The firms email monitoring system failed to detect emails containing misrepresentations, according to FINRAs Letter of Acceptance, Waiver and Consent in the matter. As a result, three registered representatives in the firms Cleveland office were able to send misleading emails to clients describing investments variously as stable, completely liquid and, in one case, a very safe, sleep at night investment, according to the letter.
The FINRA letter did not identify the three individuals by name.
A FINRA spokeswoman said it wasnt known if any clients were actually harmed by the emails, which were sent over a period of time between September 2007 and October 2008.
Since that time, "enhancements to our email monitoring system have been made and we are glad to have resolved this matter, Janine Wertheim, Securities America senior vice president and chief marketing officer, said in an email.
MONITORING SYSTEM FAILURE
The firm did have an email monitoring system in place at the time the emails in question were sent, according to the letter. The system was programmed to evaluate email communications and attachments for the presence of certain words, phrases, and patterns, the letter says. Based on those criteria, the system was designed to identify emails and attachments that warranted further review, and those would then be reviewed by [Securities America] supervisory personnel.
However, when the system failed, emails were sent out that contained material misrepresentations and misleading statements about the safety and liquidity of two private placements, the letter says.
Because the emails were not caught by the system, they were not reviewed for compliance, according to FINRA. The system should have caught the following terms, the letter says: completely liquid, safe, safety and guaranteed.
The company's email monitoring system was not reasonably designed to achieve compliance with the requirements of the federal securities laws and NASD and FINRA rules concerning communications with customers, the letter concludes.
As part of the negotiation with FINRA, the letter continues, Securities America agreed to conduct a comprehensive review of its email monitoring system to ensure it has been revised to correct the problem, and to test the system to make sure it is functioning to keep the firm in compliance with FINRA and NASD rules.
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