The Financial Industry Regulatory Authority has fined Raymond James Financial Services Inc. $2 million for failing to maintain reasonably designed supervisory systems and procedures to review email communications.
Raymond James neither admitted nor denied the charges but consented to the entry of FINRA's findings. The company also agreed to conduct a risk-based retrospective review to detect potential violations evidenced in past emails.
FINRA found that Raymond James' email review system was flawed in various areas, allowing millions of emails to evade meaningful review during a nine-year period. The combinations of words and phrases used to flag emails for review were not reasonably designed to detect certain potential misconduct that the company knew or should have expected to recur from time to time, FINRA said. The company also failed to devote adequate personnel and resources to the team that reviewed emails flagged by the system even as the number of emails increased over time.
FINRA also found that Raymond James did not periodically test the configuration and effectiveness of its email surveillance system, instead focusing mainly on lowering the number of false positives that would need to be reviewed.
Additionally, FINRA found that the company unreasonably excluded from email surveillance certain employees who serviced customer brokerage accounts and failed to apply its entire lexicon to the emails of about 1,300 registered representatives who worked in branches that hosted their own email servers.