The Financial Industry Regulatory Authority (FINRA) fined Ally Invest Securities LLC $850,000 and issued a formal censure after finding that the U.S. broker-dealer failed to maintain at least 22.6 million electronic business-related communications over a six-year period.
According to FINRA’s Letter of Acceptance, Waiver, and Consent, the lapses occurred between September 2016 and November 2022, when technical errors and coding errors led to the loss of emails and messages related to trade executions, fund transfers, and account activity.
The failures are said to have violated the Securities Act of 1934 and FINRA rules that require companies to maintain complete and accurate business records.
The regulator also found that Ally’s written supervisory procedures were inadequate, leaving more than 521,000 communications unreviewed and undermining the company’s compliance systems.
These deficiencies hampered Ally’s ability to respond to 39 regulatory inquiries from both the SEC and FINRA itself, FINRA said.
Despite the violations, FINRA credited Ally for its “exceptional cooperation,” noting that the company identified the issues itself and reported the issues before they were discovered by regulators. Ally has since corrected the system failure, reviewed its recordkeeping infrastructure, and implemented broader procedural improvements.
Ally, a member of FINRA since 2005, operates primarily as an online broker-dealer from its headquarters in Charlotte, North Carolina, with more than 200 registered representatives.
The settlement resolves the matter without Ally admitting or rejecting FINRA’s findings. The penalties will come into effect on the date determined by the regulator.