Regulators on Tuesday levied $8.25 million in fines and censured five brokerage firms, including Minneapolis-based U.S. Bancorp Piper Jaffray, for failing to adequately retain e-mail records.
In addition to individual fines of $1.65 million for each firm, the joint action by the Securities and Exchange Commission, the New York Stock Exchange and National Association of Securities Dealers requires the brokerages to establish new procedures within 90 days to ensure future compliance with the rules.
The sanctions are believed to be the toughest issued for shoddy record-keeping on Wall Street, which has come under increasing scrutiny for questionable business practices during the stock market bubble of the late 1990s.
Piper and the other firms, Goldman, Sachs & Co., Salomon Smith Barney, Morgan Stanley & Co., and Deutsche Bank Securities â€” did not have to admit or deny wrongdoing in accepting the fines.
The fines are separate from a global settlement now being negotiated between several brokerages and regulators. Those fines reportedly could total $1 billion or more, with smaller firms such as Piper expected to pay about $60 million to settle allegations they tailored analyst research to reward investment banking clients.
E-mail records have played a major role in the ongoing investigations.
In a statement, Piper CEO Andrew Duff said that while the firm kept large volumes of e-mail, its former system was deemed inadequate under rules requiring firms to maintain electronic communications and other interoffice documents in an â€œaccessibleâ€� place for at least two years.
â€œWe are confident that our current e-mail procedures and enhanced software fully meets all of the regulatory requirements for e-mail retention,â€� he said.
According to the investigators, some of the firms backed up e-mails on tape as part of broader disaster-recovery processes, but they either discarded or overwrote those tapes, sometimes less than a year after the e-mails were first recorded. In other circumstances, the firms relied on individual employees to maintain e-mails on the hard drives of their personal computers, which were then erased after the employee left the company.
All of the firms were faulted for poorly organizing the records they had on hand.
The violations, which were discovered during joint and individual probes by the SEC, NYSE and NASD, began in 1999 and continued at least through 2001, the regulators said.
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