TD Private Client Wealth (TDPCW), a unit of TD Bank, has reached a settlement with regulators regarding allegations that its email-review system was not properly set up for almost a decade and failed to review approximately 3.5 million employee messages.
In order to resolve the matter, TDPCW has agreed to pay $600,000 and accept a censure from Finra, the brokerage industry's self-regulatory organization. As part of the settlement, TDPCW will also provide written certification confirming a thorough review of its compliance operations and implementation of measures to enhance its supervisory systems.
Commitment to Improvement
TDPCW, while neither admitting nor denying any wrongdoing, has expressed its commitment to improving its email review practices. Already underway, the company's internal review has prompted enhancements to policies and procedures for more timely and appropriate email review. TDPCW emphasizes its continuous efforts to strengthen internal controls in order to meet regulatory obligations.
Alleged Failure in Supervisory System
Finra alleges that between February 2013 and July 2022, TDPCW "failed to establish and maintain a supervisory system" for electronic communications. During this period, the firm's review process did not capture the emails of 691 employees.
Violations of Finra Rules
TDPCW was cited for violations of Finra's supervision rule, No. 3110, which mandates the review and record-keeping of employee activities, including electronic communications. Additionally, TDPCW was found to have violated Finra's catchall rule, No. 2010, which concerns "standards of commercial honor and principles of trade."
As part of TDPCW's commitment to compliance, the settlement marks an important step in rectifying past deficiencies and ensuring a robust review system for the future.
Alleged Email Account Misconduct Leads to Fine and Censure for TDPCW
Finra has recently fined and censured TDPCW for alleged misconduct involving the prompt entry of email accounts issued to new employees into its review queue. According to Finra, TDPCW failed to enter 43% of new hires into the email queue within five days of joining the firm. Even more concerning, Finra identified 34 employees whose email accounts were not placed in the queue for over a year, and two employees whose emails went unchecked for more than five years.
Finra attributes some of TDPCW's alleged failures to the absence of clear written procedures outlining the steps for adding an email account to the review queue and clarifying responsibility for these actions.
Without reasonable written procedures in place, miscommunications occurred between multiple departments regarding the placement of email accounts into the queue. There were also misunderstandings about which department should carry out specific steps required for queue placement. This lack of clarity contributed to TDPCW's inability to effectively manage email accounts.
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