The
Financial Industry Regulatory Authority (FINRA) has censured H2C Securities
Inc. and fined the firm $250,000 for failing to preserve and review over 1.25
million business-related electronic communications from January 2013 to June
2021. The communications were sent or received by H2C Securities’ associated
persons using four platforms made available by the firm.
According
to the Letter of Acceptance, Waiver, and Consent (AWC), H2C Securities’
supervisory system, including written supervisory procedures, “was not
reasonably designed to achieve compliance with the firm’s obligation to
capture, retain, and review communications” sent or received using these
electronic communication platforms.
The AWC
states that the firm’s written supervisory procedures failed to identify that
associated persons had access to the platforms, the circumstances under which
they could use them for electronic communications, or how the firm would
preserve and review those communications. H2C Securities did not conduct any
reviews of its system to preserve electronic communications sent or received
through the four platforms until March 2021.
“During
this period, the firm’s supervisory system failed to address the use of the
four platforms at issue,” FINRA commented.
In addition
to the censure and fine, H2C Securities has agreed to an undertaking requiring
a member of the firm’s senior management to certify in writing within 60 days
that the firm has remediated the issues identified in the AWC and implemented a
supervisory system reasonably designed to achieve compliance with relevant
rules and regulations.
Recent FINRA Penalties
The penalty
imposed by FINRA on H2C Securities is among the smaller ones lately. Two weeks
ago, M1 Finance was fined $850,000 for misleading social media posts featuring
1,700 influencers.
In February 2024, FINRA fined Morgan Stanley $1.6 million for supervisory failures. Interestingly, the regulatory body had previously fined the bank for similar lapses in 2015. Meanwhile, Goldman Sachs was fined
more than $512,000 for not properly monitoring its trades, a process that
spanned 14 years, starting in 2009.
As for regulatory
changes, FINRA is introducing new rules regarding fractional shares, which will take effect at the beginning of next year.
The
Financial Industry Regulatory Authority (FINRA) has censured H2C Securities
Inc. and fined the firm $250,000 for failing to preserve and review over 1.25
million business-related electronic communications from January 2013 to June
2021. The communications were sent or received by H2C Securities’ associated
persons using four platforms made available by the firm.
According
to the Letter of Acceptance, Waiver, and Consent (AWC), H2C Securities’
supervisory system, including written supervisory procedures, “was not
reasonably designed to achieve compliance with the firm’s obligation to
capture, retain, and review communications” sent or received using these
electronic communication platforms.
The AWC
states that the firm’s written supervisory procedures failed to identify that
associated persons had access to the platforms, the circumstances under which
they could use them for electronic communications, or how the firm would
preserve and review those communications. H2C Securities did not conduct any
reviews of its system to preserve electronic communications sent or received
through the four platforms until March 2021.
“During
this period, the firm’s supervisory system failed to address the use of the
four platforms at issue,” FINRA commented.
In addition
to the censure and fine, H2C Securities has agreed to an undertaking requiring
a member of the firm’s senior management to certify in writing within 60 days
that the firm has remediated the issues identified in the AWC and implemented a
supervisory system reasonably designed to achieve compliance with relevant
rules and regulations.
Recent FINRA Penalties
The penalty
imposed by FINRA on H2C Securities is among the smaller ones lately. Two weeks
ago, M1 Finance was fined $850,000 for misleading social media posts featuring
1,700 influencers.
In February 2024, FINRA fined Morgan Stanley $1.6 million for supervisory failures. Interestingly, the regulatory body had previously fined the bank for similar lapses in 2015. Meanwhile, Goldman Sachs was fined
more than $512,000 for not properly monitoring its trades, a process that
spanned 14 years, starting in 2009.
As for regulatory
changes, FINRA is introducing new rules regarding fractional shares, which will take effect at the beginning of next year.
