Study Finds Small Securities Firms Still Fail To Comply With SEC E-mail Archiving Regulations

Intradyn, the St. Paul, MN e-mail compliance software developer, revealed a research study today that suggests more than one in three small-to-mid-sized securities firms still not archiving e-mail to meet SEC regulations.

The research project, conducted the University of St. Thomas in St. Paul and commissioned by Intradyn, was to ascertain the current practices of smaller SEC-regulated broker-dealers. SEC-regulated firms must maintain a secure, non-alterable, and searchable archive of all their e-mail for as long as seven years in some instances, or face stiff penalties and fines.

Firms of less than 100 employees were selected for the survey on an “nth name” basis across the entire U.S. from the National Association of Securities Dealers (NASD) membership list. This category makes up approximately 94 percent of the NASD’s membership. A single individual at each broker-dealer firm was interviewed, either the compliance officer or the principal charged with that responsibility. If those individuals were not available, the IT managers were contacted.

Key findings indicate that 36 percent of the firms surveyed were not yet archiving e-mail. More surprising, 20 percent said they were not even aware of the requirements. However, 80 percent of the firms that were not currently archiving have plans to do so.

Even though their privacy was assured, more than half of the broker-dealers contacted refused to participate in the survey. These firms were not counted in the study results.

Such anonymity is understandable given the heavy fines have which been handed down in recent years for e-mail retention transgressions. Last month, a small brokerage in Pennsylvania, Hornor Townsend & Kent, was fined $325,000 for violations that included failing to retain the e-mail communications of 83 employees. And in 2003, a group of large Wall Street brokerages was fined in 2003 a collective $1.4 billion.