Ally Invest Securities LLC accepted an $850k fine and censure over recordkeeping and supervision failures tied to its business electronic communications retention procedures, though it received credit for extraordinary cooperation.   

According to FINRA, from September 2016 through November 2022, Ally failed to preserve at least 22.6 million customer communications and additional messages from around 90 group mailboxes and could not fully answer 39 SEC/FINRA regulatory inquiries that sought those records.

According to the Letter of Acceptance, Waiver, and Consent (AWC), separate coding errors and technical failures across three systems caused Ally to lose those customer and internal business communications, including when a migration to a new message retention platform deleted a copying feature that had been capturing certain emails to a dedicated mailbox.

FINRA also found that during the same period, Ally’s supervisory system and written supervisory procedures (WSPs) were not reasonably designed to ensure review of business e-communications: Neither required shared/group mailboxes and customer service user accounts to be connected to the firm’s surveillance system, and neither set out any method to verify that connectivity.

As such, Ally did not timely review 521,000 messages from about 30 group mailboxes and a customer service platform, with an unknown quantity unreviewed from 90 group mailboxes.

Cooperation credit

FINRA credited Ally with “extraordinary cooperation.” According to the SRO, Ally “identified and self-reported each of the issues … promptly corrected each of the systems failures…” and proactively identified the “cause, scope, and impact of each issue and by providing detailed factual summaries.”

Under FINRA Regulatory Notice 19-23, cooperation credit may take the form of reduced fines and/or foregoing undertakings, among other possibilities.

Rule violations

For the recordkeeping and supervision lapses, Ally was charged with violations of:

• Exchange Act §17(a) and SEC Rule 17a-4, covering broker-dealer books-and-records requirements,
• FINRA Rules 4511 and 2010 covering books and records and standards of commercial honor requirements, respectively, and;
• FINRA Rule 3110 and, derivatively, Rule 2010, requiring supervisory policies reasonably designed to achieve compliance with securities laws and FINRA rules.