A Florida-based brokerage firm will pay $500,000 to settle Financial Industry Regulatory Authority allegations that it failed to retain more than 10,000 business-related text messages over 10 years.
The settlement is against Dawson James Securities, a broker/dealer in Boca Raton, Fla., with three branches and about 35 registered representatives, according to FINRA. The firm mainly sells private and public securities offerings, as per settlement letter of regulator b/d released on Friday.
CEO Robert Dawson Keyser Jr., who founded the firm in 2002, was also named in the settlement. He has been in the industry since 1984 and is registered with more than a dozen firms in New York and Florida, he said. BrokerCheck Profile.
Beginning in August 2011, Dawson James prohibited their employees from texting for business-related communications. The firm lifted that ban in December 2017, only to reinstate it a few years later in January 2021. However, the firm never had a system to “store or review” any business-related messages, according to FINRA.
The firm failed to capture and retain more than 10,900 business-related texts sent or received by at least 27 employees, including communications related to the firm's net worth calculations, consumer complaints and client referrals.
“The firm's management knew that related persons were using text messages for business-related communications, and during the period when the firm prohibited the use of text messages for business purposes, Keyser Jr. used his firm-issued cell phone to send and receive about 4,400 businesses. related text messages,” the agreement states.
The settlement emerged from a review of FINRA examiners conducted by Dawson James. In addition to the alleged messaging errors, regulators also found the firm's oversight systems for due diligence on private placement offerings “deficient in some respects,” according to the settlement.
First, Dawson James' procedures did not address conflicts that arose when its investment bankers “conducted due diligence on offerings from issuers with which they were affiliated.”
Although Dawson James neither admitted nor denied the findings in the settlement, the firm agreed to a $500,000 fine, a censure and to hire a third-party compliance consultant to analyze their procedures related to text retention and review. business related. other things. Keyser, Jr. agreed to a one-month suspension and a $10,000 fine.
Dawson James Securities did not respond to a request for comment as of press time.
The Securities and Exchange Commission is also cracking down on firms for not keeping business-related texts.
Last week, The SEC fined New York-based RIA Senvest Management $6.5 million for failure to preserve business-related electronic communications. Overall, the firm's employees sent and received thousands of business-related off-channel communications over two years, including discussions between senior officers, managing directors and other employees.
The commission is running a multi-year campaign against out-of-channel communications in the industry, starting with September 2022 penalties to 15 b/d and an investment adviser in total 1.1 billion dollars. They followed them with charges against HSBC in March 2023 and Wells Fargo and BNP Paribas in August of that year.
Last February, The SEC fined 16 other firms, including Northwestern Mutual and Guggenheim Securities. The firms have collectively paid more than $81 million to settle the charges.