Arbitration Sanctions Raised Red Flags
Discovery Disputes and Missing Messages
The underlying arbitration dates back to 2017 and involved Benjamin Edwards’ recruitment of representatives from another, unnamed firm. During those proceedings, the arbitration panel sanctioned the broker-dealer twice.
The first sanction came after the firm failed to comply with orders to produce communications — including business-related texts. The second followed the late production of some, but not all, of the text messages the panel had required during discovery.
Despite those warning signals, FINRA said the firm did not take adequate corrective steps.
Regulators alleged that five representatives — including at least one senior executive — exchanged more than 3,500 business-related text messages using personal devices. FINRA described the arbitration sanctions as a clear “red flag” that should have triggered stronger compliance measures, yet the firm “failed to take reasonable steps” to meet its recordkeeping obligations.
“These text messages involved, among other things, receiving investment directives and sensitive personal information from customers and giving investment advice to customers,” FINRA wrote in its letter. The regulator added that Benjamin Edwards was ultimately able to retrieve certain messages during FINRA’s investigation.
