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Enforcement Actions
Financial Industry Regulatory Authority (FINRA)
CASES OF NOTE
2011
NOTE: Stipulations of Fact and Consent to Penalty (SFC); Offers of Settlement (OS); and Letters of Acceptance Waiver, and Consent (AWC) are entered into by Respondents without admitting or denying the allegations, but consent is given to the described sanctions & to the entry of findings. Additionally, for AWCs, if FINRA has reason to believe a violation has occurred and the member or associated person does not dispute the violation, FINRA may prepare and request that the member or associated person execute a letter accepting a finding of violation, consenting to the imposition of sanctions, and agreeing to waive such member's or associated person's right to a hearing before a hearing panel, and any right of appeal to the National Adjudicatory Council, the SEC, and the courts, or to otherwise challenge the validity of the letter, if the letter is accepted. The letter shall describe the act or practice engaged in or omitted, the rule, regulation, or statutory provision violated, and the sanction or sanctions to be imposed.
March 2011
First New York Securities L.L.C.
AWC/2006005271003/March 2011

The Firm failed to preserve for a period of not less than three years, the first two in an accessible place, copies of instant messages sent and received between several of the firmís traders and an external party on certain days within a total of approximately 10 weeks, and the new account form and clearing agreement for one of the firmís accounts at another broker-dealer. The firmís supervisory system did not provide for supervision reasonably designed to achieve compliance with applicable securities laws, regulations and FINRA rules concerning retention and review of electronic communications.

In response to an NASD Rule 8210 request, a firm principal orally asked the associated person originally responsible for the firmís reviews of such electronic communications to gather and deliver the evidence of such reviews but the associated person realized he had misplaced the file and was directed by his supervisor to duplicate past reviews. Instead of duplicating such reviews using the same parameters as were in effect during the review period, the associated person re-conducted such reviews using changed and expanded parameters, signed and hand-wrote in dates of when he estimated the reviews took place, and delivered them to the secretary of the firm principal who was responding to the inquiry on the firmís behalf. Without conducting any review of the newly created reports, the firmís principal submitted them to FINRA as evidence of the past reviews and the firm failed to take reasonable steps to confirm that the subject reports represented authentic and contemporaneous evidence of supervisory reviews that were actually conducted during the review period.

First New York Securities L.L.C. : Censured; Fined $65,000; Required to revise its written supervisory procedures concerning retention and review of electronic communications.
Tags:  Instant Messaging    Clearing Agreement    Electronic Communications     |    In: Cases of Note : FINRA
Bill Singer's Comment
FINRA advises that its sanctions in this case "reflect some mitigating factors."  U:nfortunately, those factors aren't actually spelled out in the monthly report.  As best I can infer, the mitigation is that the associated person likely thought that he/she was merely reconstructing missing documents rather than fabricating them. 
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