FINRA Ruins Barclays' Boxing Day With $3.75 Million Fine

PUBLISHED: 27 Dec 2013 @ 08:27 | Comments (0) | More info about Lou Gutheil

The Financial Industry Regulatory Authority (FINRA) just put a wet blanket on the Barclays Capital (LSE:BARC) Yule Log. At about noon EST, FINRA levied a $3.75 million fine on the financial firm for its failure to properly maintain “electronic records, emails and instant messages.”

Barclays is alleged to have violated SEC laws as well as FINRA and NASD rules and regulations by failing “to establish and maintain an adequate system and written procedures reasonable designed to achieve [regulator] compliance … as well as to timely detect and remedy deficiencies related to those requirements.” C’mon, Barclays, this is basic stuff.

What Barclays failed to do was to maintain records of communications and transactions in a “Write Once, Read Many” (WORM) format. The format is important because it preserves the integrity of the original communications by preventing alteration and disposal. The basic issue of preservation of records is essential to any responsible organization, but, perhaps even more so in the banking sector. FINRA Executive Vice President made this point clear when he said that “Ensuring the integrity, accuracy and accessibility of electronic books and records is essential to a firm’s ability to meet its compliance obligations. The format errors in this case made it nearly impossible for Barclays to verify that these key materials remained in an unaltered condition.”

Its failure to comply with a fundamental business principle has exposed Barclay customers to potential fraud and to the effects of financial irresponsibility. Barclays settled at $3.75 million without admitting fault or blame. The documentation and preservation shortcomings span a ten year period from 2002 to 2012 and includes order and trade ticket data. FINRA said that “The issues were widespread and included all of the firm;s business areas.”

The banking industry continues to fail to impress me with its seemingly never-ending mission to make as much as it can for itself without giving a rat’s petooty about the security of its customers’ information and assets. How many probes will it take? How many fines will be sufficient?” How many exposes must we have before we say, “Enough?”

Unfortunately, the powers that be are too afraid that they might create economic imbalance if they really brought the full force of the law into place in these events. Until then, banking executives are going to take their fat paychecks and bonuses and laugh all the way to the bank.

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