FINRA fines H2C Securities over review blunder
As part of a settlement with FINRA, H2C Securities Inc agreed to pay a $250,000 penalty.
As part of a settlement with the Financial Industry Regulatory Authority (FINRA), H2C Securities Inc has agreed to pay a fine of $250,000.
Between January 2013 and June 2021, H2C Securities failed to retain and review over 1.25 million business-related electronic communications, including internal and external emails, instant messages, extensive marketing materials, and documents requiring client electronic signatures. These communications were sent or received by relevant personnel of H2C using four platforms provided by the company.
During this period, the company's supervisory systems failed to address issues with the use of the four platforms and did not address how the company captures, retains, and reviews communications conducted through these four platforms. The company's written supervisory procedures failed to determine:
- Who could access these platforms
- Under what circumstances personnel could use these platforms for electronic communications
- How the company retains and reviews communications conducted through these platforms
Additionally, the company did not conduct a review of its systems to retain electronic communications sent or received through the four platforms until March 2021. At that time, during a compliance review, H2C Securities discovered that the company had not established data feeds from the four platforms to the company's systems used for storing and maintaining electronic communications.
In April 2021, H2C Securities ceased using three of the communication platforms and established data feeds from the remaining platforms to the company's systems for storing and maintaining electronic communications in July 2021.
H2C Securities has retrieved and reviewed some of the communications sent or received by its relevant personnel through these four platforms, but the company was unable to recover the majority of the communications. Most of the affected communications were mass emails sent to large distribution lists. The company retained at least one copy of many of these mass emails but did not retain copies of every email sent to each recipient.
In addition to the $250,000 fine, the company has also agreed to accept censure.
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