H2C Securities incurred a $250K fine from FINRA for regulatory violations, underscoring compliance challenges in the financial industry.
H2C Securities incurred a $250K fine from FINRA for regulatory violations, underscoring compliance challenges in the financial industry.
H2C Securities finds itself in hot water as FINRA has censured the firm and slapped it with a hefty fine of $250,000. The penalty stems from the firm’s failure to preserve and review over 1.25 million business-related electronic communications between January 2013 and June 2021. H2C Securities associated persons across four platforms provided by the firm needed to monitor these communications as per regulatory standards adequately.
The investigation from 2013 to 2021 revealed significant deficiencies in the H2C Securities supervisory system. FINRA stated that the firm needed to revise its written supervisory procedures to ensure effective compliance with capturing, retaining, and reviewing electronic communications. Notably, the required procedures to outline guidelines for the associated person’s access to these platforms, the permissible use of electronic communications, and the protocol for preserving and reviewing such communications.
The lack of oversight persisted until March 2021, as H2C Securities needed to review its electronic communication system. Commenting on the matter, FINRA remarked, “During this period, the firm’s supervisory system failed to address the use of the four platforms at issue.”
In addition to the censure and fine, H2C Securities has agreed to an undertaking that requires a senior member of the firm’s management to certify within 60 days that the identified issues have been rectified and that a robust supervisory system has been implemented to ensure compliance with regulatory requirements.
This incident comes amidst a series of recent fines imposed by FINRA on financial institutions for various compliance violations. Two weeks ago, M1 Finance faced an $850,000 fine for misleading social media posts involving 1,700 influencers. In February, Morgan Stanley faced a $1.6 million fine for supervisory failures, echoing similar lapses that led to its 2015 penalty.
Meanwhile, Goldman Sachs faced a fine exceeding $512,000 for inadequately monitoring trades spanning 14 years, beginning in 2009. Amid these regulatory actions, FINRA is planning to introduce new rules concerning fractional shares, scheduled to take effect at the beginning of next year.
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