FINRA fines Raymond James $2M over email supervision lapses
FINRA fined Raymond James $2 million for allegedly failing to properly supervise employee email communications.
FINRA discovered that during a roughly 10-year review period from December 2007 to September 2017, Raymond James’ email monitoring system was flawed. It lacked supervisory structures and procedures for analyzing email contacts. FINRA says this created an “unreasonable risk” that would allow “certain misconduct” by employees to go undetected.
“Firms have a clear obligation to reasonably supervise electronic communications, which includes periodically re-evaluating the effectiveness of existing procedures,” Susan Schroder, FINRA executive vice president, department of enforcement, said in a statement. “They should also assess whether their email review and supervisory systems are reasonably designed in light of each firm's business model.”
The regulator says it also found that the firm did not regularly test the configuration and effectiveness of its lexicon-based email surveillance system. Lexicon is used to flag emails for review. FINRA also noticed that Raymond James “unreasonably excluded” some employees who were handling customer brokerage accounts from email scrutiny.
Lexicon’s algorithm for flagging emails was “not reasonably designed to detect certain potential misconduct that Raymond James, in light of its size, structure, business model, and experience from prior disciplinary actions, knew or should have anticipated would recur from time to time,” FINRA’s statement continued.
Raymond James declined to comment.
The firm did not admit nor deny guilt, but did agree to the entry of FINRA’s findings. It also agreed to conduct a risk-based retrospective review in order to detect potential violations evidenced in past emails.