FINRA Fines Barclays US$3.75m for Record-Keeping Failures

US regulator the Financial Industry Regulatory Authority (FINRA) has fined Barclays Capital US$3.75m for systemic failures to preserve electronic records and certain emails and instant messages in the manner required for a period of at least 10 years.

Federal securities laws and FINRA rules require that business-related electronic records be kept in non-rewritable, non-erasable format (also referred to as the ‘Write-Once, Read-Many’ (WORM) format) to prevent alteration.

The US Securities and Exchange Commission (SEC) has stated that these requirements are an essential part of the investor protection function because a firm’s books and records are the ‘primary means of monitoring compliance with applicable securities laws, including antifraud provisions and financial responsibility standards.”

From at least 2002 to 2012, Barclays’ investment banking advisory service reportedly failed to preserve many of its required electronic books and records – including order and trade ticket data, trade confirmations, blotters, account records and other similar records – in WORM format, said the regulator. The issues were widespread and included all of the firm’s business areas, thus Barclays Capital was unable to determine whether all of its electronic books and records were maintained in an unaltered condition.

Brad Bennett, FINRA’s executive vice president (EVP) and chief of enforcement, said: “Ensuring the integrity, accuracy and accessibility of electronic books and records is essential to a firm’s ability to meet its compliance obligations. The format errors in this case made it nearly impossible for Barclays to verify that these key materials remained in an unaltered condition.”

FINRA also said that from May 2007 to May 2010, Barclays Capital failed to properly retain certain attachments to Bloomberg emails, and additionally failed to properly retain approximately 3.3m Bloomberg instant messages from October 2008 to May 2010. In addition to violating FINRA, SEC and National Association of Securities Dealers (NASD) rules and regulations, this adversely impacted Barclays Capital’s ability to respond to requests for electronic communications in regulatory and civil matters.

 

Lastly, FINRA reported that Barclays Capital failed to establish and maintain an adequate system and written procedures reasonably designed to achieve compliance with SEC, NASD and FINRA rules and regulations, as well as to timely detect and remedy deficiencies.

Barclays Capital neither admitted nor denied the FINRA charges, the regulator said, but did not oppose the fine.

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