FINRA: Bank-Affiliated Broker-Dealer Left 3.5M Emails Unreviewed
The Financial Industry Regulatory Authority has censured and fined First Citizens Investor Services Inc. $500,000 after finding that the Raleigh, N.C.-based broker-dealer failed to review more than 3.5 million emails sent or received by its associated persons between March 2019 and May 2026.
The firm consented to the findings without admitting or denying them in a letter of acceptance, waiver, and consent that FINRA accepted Oct. 30. FINRA found the firm violated Rules 3110 and 2010 by failing to establish, maintain, and enforce a reasonably designed supervisory system for reviewing electronic communications.
FINRA attributed the unreviewed emails to three separate failures: the exclusion of internal emails from review, keyword parameters too narrow to catch problem messages, and new email accounts that were never loaded into a replacement review system.
Exclusion of Internal Emails
From March 2019 through August 2024, First Citizens Investor Services did not route any internal emails through its electronic review queue, and its written supervisory procedures did not address internal email review, according to FINRA. At least 3 million internal emails went unreviewed.
The firm discovered the omission in November 2021 but failed to take reasonable steps to fix it, FINRA found. The gap persisted for roughly three more years, until FINRA examiners raised it during a cycle examination.
Narrow Lexicon
Over the same period, the firm’s email surveillance relied on exact word matching and strict proximity rules that did not account for variations in language or context, FINRA said. The firm also did not apply its keyword searches to email attachments.
In one example cited by FINRA, the firm failed to flag a potential customer complaint because the word “lost” did not appear close enough to other terms in its lexicon rules. In all, the firm failed to identify 19 customer complaints that were reportable under FINRA Rule 4530.
After FINRA identified the internal-email and lexicon issues, the firm revised its procedures, added supervisory controls, completed a retrospective review of internal and external emails, and filed Rule 4530 reports for the complaints it found, according to the AWC.
System Migration Lapse
In December 2024, the firm launched a new email review system that required staff to add accounts to the review queue manually. The firm did not adequately train those employees, and its procedures neither laid out onboarding steps nor required checks that accounts had been added, FINRA found.
As a result, the email accounts of 275 associated persons were never added to the queue, and at least 550,000 of their emails went unreviewed through May 2026. The firm identified that deficiency itself in May 2026, self-reported it to FINRA, and began a retrospective review that is ongoing.
In addition to the censure and fine, the firm agreed that within 120 days of the AWC’s acceptance, a senior manager who is a registered principal will certify in writing that the firm has completed a risk-based retrospective review of the emails missed between December 2024 and May 2026. The certification must also confirm the firm has met all resulting reporting obligations, including under Rule 4530 and on Forms U4 and U5.
First Citizens Investor Services has been a FINRA member since 1998. It has about 760 registered representatives and 375 branch locations, many of them inside bank branches owned by its banking affiliate.
The case follows a June action in which FINRA fined Merrill Lynch, Pierce, Fenner & Smith Inc. $225,000 after finding that its system for flagging complaints in customer survey responses relied on a lexicon built for consumer banking rather than broker-dealer complaints. In 2023 alone, Merrill failed to report more than 1,600 complaints. In December 2017, FINRA fined Raymond James Financial Services $2 million over a lexicon-based email surveillance system that it found was flawed and not periodically tested.
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