NASD Fines Firm for Record Keeping Violations

February 20, 2007

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Earlier this week, the NASD fined four broker-dealers affiliated with Fidelity Investments. According to the news release published on its website (, NASD fined the firm a total of $3.75 million for, “improperly maintaining NASD registrations for 1,100 individuals, failing to assign registered supervisors to 1,000 individuals, failing to retain the email of 1,900 registered individuals, and other electronic recordkeeping failures. NASD also ordered the four broker-dealers to conduct comprehensive audits of the firms’ systems, policies and procedures relating to registration and electronic recordkeeping.”

While the fine was not levied by the SEC against an investment advisor, it is still an excellent reminder for all advisor firms. Regulators do not take the poor implementation of policies and procedures lightly. They are also serious when it comes to firms maintaining required books and records. Under Rule 206(4)-7, it is now unlawful for an investment advisor to conduct business without implementing and enforcing written compliance policies and procedures. Do not be surprised to see enforcement actions handed down in the coming months and years by the SEC for failure to implement effective policies and internal controls. Regardless of your firm’s size, if you do not follow through on your policies and procedures, you could face a comparative outcome to what Fidelity is dealing with right now.

One of the best ways to supplement your firm’s internal controls and mitigate risk is to retain a compliance consulting firm such as RIA Compliance Consultants. Call us today to discuss our services and find out how we can develop a customize package to fit the needs of your firm.

Posted by Bryan Hill
Labels: Compliance Program, Record Keeping