Accurate recordkeeping is one of the core duties of broker-dealers and investment advisers. FINRA recently settled enforcement actions against 12 of its members, and imposed a total of $14.4 million in fines, for their failures to store electronic records in “write once, read many” (commonly referred to as “WORM”) format, as well as other violations of SEC recordkeeping rules. For another recent FINRA enforcement proceeding involving recordkeeping violations, see “Failure to Safeguard Customer Data, Preserve Records and Properly Supervise May Expose Broker-Dealers to FINRA Enforcement Action
” (Dec. 1, 2016). Private fund managers with affiliated broker-dealers should pay particular attention to this ruling. In addition, all registered investment advisers should pay heed to FINRA’s enforcement action, given that the Investment Advisers Act of 1940 imposes recordkeeping requirements similar to those that were violated in these instances. This article explores the nature of the violations and the key terms of the eight separate FINRA Letters of Acceptance, Waiver and Consent. For more on FINRA enforcement efforts, see “What the Record Number of 2016 SEC and FINRA Enforcement Actions Indicates About the Regulators’ Possible Enforcement Focus for 2017
” (Dec. 15, 2016).