Stephens, Inc. submitted a letter of Acceptance, Waiver, and Consent (AWC) in which it was censured and fined $900,000 by the Financial Industry Regulatory Authority (FINRA) for failing to adequately supervise the content and dissemination of “flash” emails, along with the securities trading in connection with the content of these emails.
According to FINRA, Stephens, Inc., based out of Little Rock Arkansas, created the “flash” emails in order to supplement its published research with frequent communications between research analysts and sales and trading employees. These emails were allegedly meant to provide a means of sharing publicly available information, such as press releases and earnings calls, with the firm’s sales personnel who would then share the publicly available information to interested clients. However, FINRA found that from at least August 2013 through January 2016, Stephens, Inc. failed to properly supervise the content and dissemination of these flash emails, thereby creating the risk that they could potentially contain nonpublic information that could be misused by sales and trading staff.
FINRA also noted that Stephens, Inc. representatives sometimes forwarded flash emails which were marked for internal use only to customers. Stephens representatives were also found to have cut and pasted the text of an internal only flash email to firm customers. Stephens, Inc. failed to have adequate policies and procedures to supervise and/or detect the flash email content and dissemination. Without admitting or denying FINRA’s findings, the firm consented to the sanctions and agreed to additional remedial actions such as discontinuing the distribution of the flash emails and submitting a written plan of how it will review the adequacy and implementation of its policies and procedures related to the aforementioned supervisory violations.
Stockbrokers, registered representatives, and other financial industry professionals have been known to engage in many types of misconduct which are in violation of industry rules and procedures. In order to protect customers from such misconduct, FINRA rules require broker-dealers to establish and implement a reasonable supervisory system. The implementation of these rules requires supervisors to monitor its employees’ use of electronic mail and texts to ensure compliance with federal and state securities laws, securities industry rules and regulations, as well as the brokerage firm’s own policies and procedures. If broker dealers and their supervisors fail to establish and implement these protective measures, they may be held liable to account holders for losses flowing from the employees’ misconduct. As a result, account holders who have suffered losses stemming from unsuitable recommendations, unauthorized securities transactions or other misconduct by their broker or registered representative can bring forth claims to recover damages against broker-dealers, like Stephens, Inc., which have a duty to supervise its employees in order to prevent broker misconduct.
Have you suffered losses in your Stephens, Inc. investment account due to the broker dealer’s failure to supervise its registered representatives? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation. Mr. Pearce is accepting clients with valid claims against Stephens, Inc. financial professionals for unsuitable recommendations, unauthorized securities transactions, and other types of stockbroker misconduct.
The most important of investors’ rights is the right to be informed! This Investors’ Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 40 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities, and investment law issues. The lawyers at our law firm are devoted to protecting investors’ rights throughout the United States and internationally! Please post a comment, call (800) 732-2889, send Mr. Pearce an email at email@example.com, and/or visit our website at www.secatty.com for answers to any of your questions about this blog post and/or any related matter.