FINRA Fines St. Louis-Based Broker-Dealer $750K Over Texting, Discovery Violations

The Financial Industry Regulatory Authority has censured and fined Benjamin F. Edwards & Co. Inc. $750,000 following findings that the firm failed to supervise business-related text messaging and failed to meet its discovery obligations during a prior arbitration.

The St. Louis-based broker-dealer, which employs approximately 560 registered representatives, settled the matter through a letter of acceptance, waiver, and consent, known as an AWC, without admitting or denying the findings.

According to FINRA, between October 2019 and December 2023, Benjamin F. Edwards failed to reasonably supervise its employees’ use of text messaging for firm business. While the firm’s internal policies generally prohibited business texting outside of firm-approved software, FINRA found that the firm lacked a supervisory system to monitor for compliance with this policy.

The investigation revealed that at least five registered representatives, including one senior executive, used unapproved personal devices to exchange at least 3,560 business-related text messages on personal devices. These messages included, according to FINRA, investment advice provided to customers, directives for investment transactions, and the exchange of sensitive personal customer information.

FINRA noted that these failures persisted despite the fact that the firm was on notice regarding its inability to capture these communications.

The fine also addresses failures related to a 2017 arbitration involving the firm’s recruiting practices. FINRA found that Benjamin F. Edwards failed to comply with multiple orders from an arbitration panel to produce electronic communications, including text messages, in a timely fashion.

Depositions later revealed the existence of responsive messages that the firm failed to produce during discovery. This resulted in two separate sets of sanctions imposed by the arbitration panel in 2019, prior to the current FINRA enforcement action.

In May 2023, the firm retained an outside consultant to overhaul its electronic communication supervision. Since then, Benjamin F. Edwards has reportedly strengthened its written supervisory procedures, implemented regular certifications for employees regarding texting policies, and enhanced training and electronic monitoring systems.

In addition to the $750,000 fine, the firm received a formal censure.

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