H2C Securities Inc has agreed to pay a fine of $250,000 as a part of a settlement with the Financial Industry Regulatory Authority (FINRA).
From at least January 2013 to June 2021, H2C Securities failed to preserve and review over 1.25 million business-related electronic communications, including internal and external emails, instant messages, mass marketing materials, and documents requiring customers’ electronic signatures. 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. The firm’s written supervisory procedures failed to identify: (1) that associated persons had access to these platforms; (2) the circumstances under which associated persons could use these platforms for electronic communications; or (3) how the firm would preserve and review communications made through these platforms.
Additionally, the firm did not conduct any reviews of its system to preserve electronic communications sent or received through the four platforms until March 2021. At that time, H2C Securities discovered, during a compliance review, that it had not established data feeds from the four platforms to the system that the firm used to store and maintain electronic communications. H2C Securities discontinued its use of three of the communication platforms in April 2021, and in July 2021, it established a data feed from the remaining platform to the firm’s system for storing and maintaining electronic communications.
H2C Securities has since retrieved and reviewed some communications that its associated persons sent or received using the four platforms, but the firm has been unable to recover most of the communications. The vast majority of the affected communications were mass marketing emails sent to large distribution lists. The firm preserved at least one copy of many of the mass marketing communications, but it did not preserve a copy of each message sent to each recipient.
On top of the $250,000 fine, the firm has agreed to a censure.
