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While agreeing to the settlement, the firms, which included affiliates New England Securities Corp., Walnut Street Securities Inc. and Tower Square Securities Inc., neither admitted nor denied the charges, but consented to the entry of FINRA's findings.
FINRA alleged that written supervisory procedures of the firms were insufficient. Although the rules mandated that a supervisor review all securities-related e-mails of brokers, the firms did not have a system in place that enabled supervisors to directly monitor the e-mail communications of brokers. Instead, the firms relied on the brokers themselves to forward their e-mails to supervisors for review.
"Although FINRA's rules afford firms the flexibility to tailor procedures that are appropriate for their particular business models, all firms must have the ability to flag e-mails that may evidence misconduct," Susan Merrill, FINRA EVP and chief of enforcement, said in statement. "Relying on brokers to provide copies of their own e-mails to supervisors for review is hardly an effective means to detect such misconduct."
