- Five top Wall Street brokerages this week agreed to pay a total of $US8.25 million in fines for improperly storing email and promised to establish new systems and procedures for ensuring that they comply with government requirements.
But none of the firms would disclose what they plan to do from a technology standpoint to make sure the email messages employees send and receive are retained.
"We have 90 days to respond to this," says Ted Meyer, a spokesman for Deutsche Bank Securities, one of the fined brokerages.
"It's something we're reviewing at the moment."
The US Securities and Exchange Commission, the New York Stock Exchange and the National Association of Securities Dealers (NASD), which is in the process of cutting its ties with the Nasdaq Stock Market, say that they each investigated the way the brokerages handled email dating back to 1999. In a joint statement, the regulators say all of the firms had "inadequate procedures and systems to retain and make accessible email communications."
In addition to Deutsche Bank Securities, the targeted firms included Goldman Sachs & Co, Morgan Stanley, Salomon Smith Barney and US Bancorp Piper Jaffray. Without admitting to or denying the allegations, each of the brokerages agreed to pay a fine of $US1.65 million.
The SEC, the NYSE and the NASD require financial services firms to retain email traffic for three years and store it in an accessible system for two years. They cited a variety of shortcomings at the five companies.
For example, some relied on employees to store copies of email messages on their local disk drives, but systems to ensure that workers did so were inadequate, the regulators said. And in some cases, PC disk drives that contained stored email were erased when employees left their jobs.
Jim Phillips, CIO at First Southwest, a Dallas-based brokerage, says regulators in recent months have become more forceful about looking into whether firms are properly retaining email.
"We're seeing continual asking of the questions," he says. "We've been fortunate in that we've been able to answer them."
Three years ago, First Southwest rolled out software developed by Redwood City, California-based Tumbleweed Communications that archives and monitors about 8000 email messages per day across 21 branch offices. The brokerage uses Tumbleweed's software on its Microsoft Exchange email servers to screen out inappropriate messages and to save all email to network-attached storage, tape and optical disk systems, Phillips says.
"We're a bit paranoid," he notes. "When we began to put file servers into all our offices, and all our desktops then had email, we began to back up all our email."