FINRA Fines Scottrade $2.6 Million for Failures in Electronic Records Retention

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FINRA Fines Scottrade $2.6 Million for Significant Failures in Required Electronic Records and Email Retention

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The Financial Industry Regulatory Authority (FINRA) fined Scottrade, Inc. $2.6 million for failing to retain a large number of securities-related electronic records in the required format, and for failing to retain certain categories of outgoing emails. Scottrade also did not have a reasonable supervisory system in place to achieve compliance with certain Securities and Exchange Commission (SEC) and FINRA books and records rules, which contributed to its record-retention failures.

FINRA found that from January 2011 to January 2014, Scottrade did not have centralized document-retention processes or procedures for all firm departments to follow. Further, no one at the firm was charged with responsibility for ensuring a consistent document-retention process, fully compliant with the record-retention rules, including the requirement that all records be retained in the proper format. Personnel in different departments of the firm saved certain documents to a restricted shared drive, which was not WORM-compliant. As a result, Scottrade failed to preserve a large number of key securities business electronic records in the required format.

Over a related time frame, FINRA found that Scottrade also failed to copy more than 168 million outgoing emails to the firm's WORM storage device, resulting in the deletion of those emails. These emails were generated automatically by the firm's internal systems or by third-party vendors acting on Scottrade's behalf, and included items such as margin call notices, address change notifications and failed password attempt notifications.

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