Edward Jones has agreed to pay a fine of more than $1 million to settle allegations that it failed to produce phone records that regulators were seeking during 10 investigations of the firm.
Finra, the brokerage industry’s self-regulatory organization, alleged that Edward Jones incorrectly told investigators that records older than 18 months weren’t available and then failed to notify the regulator when it learned of its error.
Edward Jones issued a brief statement addressing the allegations. “We take our responsibilities to produce information in regulatory inquiries very seriously and have remedied the issues raised in this matter,” the company said in an email.
Finra alleged compliance failures associated with investigations dating from May 2017 to March 2021 involving allegations of unauthorized, excessive, and discretionary trading.
In February 2017, Edward Jones adopted a policy of deleting records of phone calls after 18 months from an internal server, what Finra refers to as Location A, according to the letter of acceptance, waiver, and consent detailing the allegations.
Edward Jones used Location A to produce records in response to regulatory requests, so when Finra investigators came looking for call records, they were told that those call logs had been deleted.
But Edward Jones stored those records for longer in a separate database, which Finra calls Location B. The company used this database for business planning purposes rather than for responding to regulatory requests, but it nonetheless housed the phone records investigators were seeking, according to Finra.
“Although the firm decided that it would not apply the purge protocol to the call detail records contained in Location B, it did not search, or implement a procedure to search, Location B when responding to document requests for call detail records that went back in time more than 18 months,” Finra said in its settlement letter.
Compounding the matter, when the Edward Jones team charged with handling regulatory requests learned that the records were still available in Location B, it allegedly did not always search that database and did not immediately notify Finra that its previous insistences that the records were unavailable were inaccurate.
“The firm failed to promptly advise Finra of its production failures, doing so only in March 2020, eight months after learning of the issue, and after Finra enforcement staff raised questions about what appeared to be an incomplete production of phone records in another matter it was then investigating,” the regulator said.
Additionally, after Edward Jones had implemented the policy of deleting phone records after 18 months from its internal server, it received requests from Finra for records that were approaching that threshold, but “did not take action to prevent responsive records from being deleted pursuant to the firm’s purge protocol,” Finra said in its settlement letter.
“As a result, call detail records continued to be purged between the time the firm received the request and the time that members of the firm’s response team pulled the records from Location A, which resulted in responsive records being deleted and not included in the firm’s response,” Finra added.
Edward Jones accepted a censure and agreed to pay a $1.1 million fine and take steps to improve its record-keeping protocols.
Edward Jones settled the matter without admitting or denying wrongdoing.