H2C Securities Inc has agreed to pay a $250,000 fine as part of a settlement with the Financial Industry Regulatory Authority (FINRA).
From at least January 2013 through June 2021, H2C Securities failed to retain and audit more than 1.25 million business-related electronic communications, including internal and external emails, instant messages, mass marketing materials and documents that require electronic customer signatures. These communications were sent or received by H2C affiliates using four platforms made available to them by the company.
During that time, the company’s oversight system failed to address the use of the four platforms at issue or how the company would capture, maintain and review communications made through them. The company’s written supervisory procedures failed to identify: (1) that the connected persons had access to these platforms; (2) the circumstances under which connected persons could use these platforms for electronic communications; or (3) how the company will retain and review communications made through these platforms;
Additionally, the company did not conduct any review of its system for maintaining electronic communications sent or received through the four platforms until March 2021. At that time, H2C Securities discovered, during a compliance audit, that it had not established data streams from the four platforms into the system the company used to store and maintain electronic communications. H2C Securities discontinued the use of three of the communication platforms in April 2021 and in July 2021 created a data feed from the remaining platform to the company’s system for storing and maintaining electronic communications.
H2C Securities has since retrieved and reviewed some communications sent or received by the connected persons using the four platforms, but the company was unable to retrieve most of the communications. The vast majority of affected communications were mass marketing emails sent to large distribution lists. The company kept at least one copy of many of its mass marketing communications, but did not keep a copy of every message sent to every recipient.
In addition to the $250,000 fine, the company agreed to a censure.