The Financial Industry Regulatory Authority and TD Private Client Wealth LLC have agreed to settle charges that the firm failed to establish and maintain an appropriate supervisory system that allowed such that the firm failed to review approximately 3.5 million emails related to 691 employee email accounts. TD Private Client Wealth consented to a censure and a $600,000 fine to settle the alleged violations of FINRA rules.
From February 2013 through July 2022, FINRA says the firm often failed to place the email accounts for its new employees into the electronic queue it established for email review. Approximately 43% of employees were not placed into the review queue within five days of the date that they became associated with the firm. At least 34 employees were not added for more than one year, and at least two employees were not added for more than five years. The firm’s written procedures failed to set forth the necessary steps to add accounts to the review queue, identify the departments or personnel responsible for those steps, or identify any requirements for when the steps should be taken. Due to the lack of reasonable written procedures, there were miscommunications between multiple departments about whether the email accounts had been placed into the queue and misunderstandings about which department was responsible for carrying out particular steps required to place an account into the queue. As a result, FINRA says the firm failed to review approximately 3.5 million emails, from 691 employee email accounts, for varying periods of time during the relevant period.
According to FINRA, the firm also failed to maintain a reasonable system to verify that new employees’ email accounts were being placed into the firm’s electronic queue for review. Rather, the firm relied on an ad hoc and occasional practice of manually comparing a list of new hires with the names of the employees whose email accounts had been placed into the electronic queue. Between February 2013 and July 2022, approximately 860 employees became associated with the firm.
In addition, the firm allegedly failed to reasonably investigate and address red flags that employee email accounts were missing from the review queue. For example, during November 2018 and August 2019, the firm’s compliance personnel detected that certain email accounts were not being reviewed and asked the firm’s information technology personnel to ensure that the accounts were included in the queue. Yet due to miscommunications among personnel and a misunderstanding of the steps required for review, the emails were not promptly added to the review queue, in some instances until February 2022. Additionally, no one at the firm verified whether the emails had been added. FINRA says the firm did not reasonably investigate why the email accounts were missing and whether any other email accounts were missing until after FINRA commenced its investigation.