According to the Letter of Acceptance, Waiver, and Consent (AWC), from January 2013 to June 2021, H2C Securities failed to preserve over 1.25m business-related electronic communications because it had not established a data feed from four platforms to the system that the firm used to store and maintain electronic communications.

Supervisory failures

During this period, the AWC stated that the firm’s 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 business-related electronic communications included internal and external emails, instant messages, mass marketing materials, and documents requiring customers’ electronic signatures. The AWC said, “these communications were sent or received by associated persons of H2C using four platforms that the firm made available to them”.

“During this period, the firm’s supervisory system failed to address the use of the four platforms at issue or how the firm would capture, preserve, and review communications made through them,” explained the AWC.

The firm’s written supervisory procedures failed to identify:

• that associated persons had access to these platforms;
• the circumstances under which associated persons could use these platforms for electronic communications; or
• how the firm would preserve and review communications made through these platforms.

The firm did not conduct any reviews of its systems to preserve electronic communications sent or received through the four platforms until March 2021.

Sanctions

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.

• Full list of fines for recordkeeping failures involving at least some combination of texts, WhatsApp messages, and audio files, if not other communications formats, since 2022.

SEA 1934 Rule 17a-4
FINRA Rule 2010
FINRA Rule 3110
FINRA Rule 4511
NASD Rule 3010