Watchdog (SEC) v. Watchdog (FINRA): Destruction, Doctoring and Deflection

In the first settlement of its kind, FINRA settled with the SEC on October 27, 2011 due to allegations over a 2008 incident where a regional Kansas City office of FINRA doctored documents. The alleged doctored documents were from three internal staff meetings, where information was either edited or deleted and then provided to the SEC with the “inaccurate and incomplete” changes. Mary Shapiro, currently the Chairman of the SEC, is in an interesting spot as she was Chief Executive of FINRA at the time of the alleged wrongdoing. She apparently had no direct involvement with the decision to take action against FINRA.

The motives for doctoring the documents are unclear, and so is whether or not the alterations of the documents led to any material damage other than FINRA’s diminished credibility. Ironically, the SEC has had its own struggles in recent months with a slew of articles published in various newspapers highlighting their own challenges with document retention and the improper destruction of documents. Both of these scenarios have been called to light by whistleblowers within their respective agencies.

These antics certainly pose the question: Is it a good use of taxpayer money to have regulatory agencies fighting each other over document retention and record keeping practices? The answer is probably no. But the first question begs the second: If they don’t do it, who will? While information management is not the sexiest part of the SEC and FINRA’s responsibilities, it certainly is an important one and the foundation of their information intelligence. Without proper document retention and information governance, the probability of connecting the dots to discover insider trading or other malfeasance is low. Moreover, in order for agencies to retain credibility they need to be able to locate documents with ease and speed and those documents must be truthful and accurate.

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Source: eDiscovery 2.0
By: Allison Walton