TD Private Client Wealth (TDPCW), a subsidiary of TD Bank, has agreed to a settlement of $600,000 with Finra, the brokerage industry's self-regulatory body, to resolve claims that it inadequately supervised its email review system for almost ten years. This oversight led to approximately 3.5 million employee messages not being reviewed as required.
In addition to the financial settlement, TDPCW has accepted a formal censure and committed to providing a written certification confirming the completion of a comprehensive audit of its compliance practices and the implementation of enhanced supervisory systems. TDPCW has undertaken these measures without conceding any wrongdoing, affirming that improvements to their policies and procedures are already in progress.
"TD Private Client Wealth is dedicated to continuously advancing our internal processes and controls to uphold our regulatory responsibilities," the firm stated. "Our in-depth internal assessment has prompted the refinement of our email monitoring policies to ensure they are more effective and timely."
According to Finra, from February 2013 to July 2022, TDPCW did not effectively implement a supervisory system for managing its electronic communications. This lapse resulted in the email accounts of 691 employees bypassing the company's review process.
Finra highlighted that TDPCW's failure to comply with its Rule No. 3110, concerning the supervision and record-keeping of employee activities, including electronic communications, constituted a breach of this regulation and Rule No. 2010, which mandates adherence to standards of commercial integrity and trade principles.
Finra's findings revealed significant delays by TDPCW in adding new employees' email accounts to the review queue. The investigation uncovered that 43% of new hires were not added to the email queue within five days of their start date. Furthermore, Finra identified 34 employees whose emails were not monitored for over a year, including two whose communications went unchecked for over five years.
The sanction imposed on TDPCW is part of a broader trend of regulatory actions against firms that fail to meet their review and record-keeping responsibilities. These issues are often exacerbated by employees using unapproved communication channels like WhatsApp or Signal, which escape the firm's monitoring systems and leave a gap in the record of interactions with clients, vendors, and colleagues.
Finra attributed some of TDPCW's lapses to the absence of clear, written procedures for adding email accounts to the monitoring queue and defining departmental responsibilities for this task. Finra noted, "The lack of detailed written processes led to miscommunications among various departments over the status of email accounts in the queue and confusion about departmental duties in executing necessary steps for account monitoring."
