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SEC Fines Broker-Dealer $100K Over Failure to Save Text Messages

By Alex Padalka October 8, 2020

The SEC says it has fined a broker-dealer $100,000 as part of a settlement over the firm's failure to preserve its registered representatives’ business-related text messages.

The regulator says that JonesTrading Institutional Services had polices in place barring representatives from using text messages for business-related correspondence. But in connection with the SEC’s investigation last year into a third party, the SEC found that in 2018 and 2019, several of the company’s representatives exchanged business-related text messages with each other, with JonesTrading clients and with other third parties, according to an administrative proceeding document published by the SEC last month. 

The messages contained information about the size of orders, timing of trading, product offerings, market securities price updates and the timing of administrative filings with the SEC, the regulator says. JonesTrading didn’t preserve copies of the messages, according to the SEC.

Furthermore, the company’s senior management knew that employees used text messages to communicate with each other and the firm’s clients, according to the SEC's findings. And even some of the firm’s senior management, including its compliance staff, exchanged business-related text messages with other JonesTrading staff, the SEC says.

The company took some remedial action after the SEC alerted it about the issue, the regulator says. This included requiring additional compliance trading, reminding employees to record and retain all electronic business communications and reiterating its ban on business-related communications via text messaging, according to the SEC. The company also told employees that those interested in using personal devices for business purposes could use firm-sponsored software for preserving text messages, the SEC says.

JonesTrading consented to the fine without admitting or denying the findings, according to the administrative proceeding document.

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