The trend of text messaging compliance failures at investment firms continues as an investigation by Finra finds multiple violations at a Florida broker-dealer.
Dawson James Securities, a Boca Raton, Florida-based firm, and its CEO, Robert Dawson Keyser Jr., have agreed to pay fines to Finra over multiple compliance failures over the past decade, including lapses in preserving business-related text messages and conducting due diligence on private placement offerings.
Keyser, who has been with Dawson James Securities since 2004 and served as CEO and a shareholder since August 2012, has been working in the securities industry since 1984.
Under his leadership, Dawson James Securities, which has approximately 35 registered representatives across three branch offices, has primarily focused on selling private and public securities offerings.
According to Finra’s investigation, from August 2011 through January 2021, the firm failed to capture, retain, and review more than 10,900 business-related text messages sent or received by at least 27 associated persons, including Keyser.
"These messages included communications about the firm’s net capital computations, communications about customer complaints, and communications with customers about holding or selling positions in stocks and warrants," according to the letter of acceptance, waiver and consent dated April 4.
Keyser accounted for a large chunk of the violations, as he reportedly sent or received 4,400 text messages pertaining to his firm’s securities business between August 2011 and December 2017.
Despite the firm's policy against using text messaging for business purposes, these practices persisted unmonitored and the messages went unarchived.
The violations extend to the firm's oversight of private placement offerings between December 2016 and March 2019. Finra highlighted Dawson James Securities’ inadequate supervisory system and procedures for conducting due diligence, a key requirement to ensure the suitability of securities transactions for customers.
These lapses breached several regulatory standards, including Section 17(a) of the Securities Exchange Act of 1934 and Finra Rules 3110, 4511, and 2010, reflecting the firm's failure to comply with recordkeeping and supervisory obligations.
As a result of these findings, Keyser faces a one-month suspension from associating with any Finra member in any capacity and a $10,000 fine.
Meanwhile, Dawson James Securities has been censured and fined $500,000. Additionally, the firm agreed to undertake measures to review and improve its supervisory system and procedures, specifically in areas related to the preservation and review of business communications and the due diligence process for private placement offerings.
The case in Florida comes after the SEC found similar violations at Ameriprise and LPL, with each facing firm penalties to the tune of $50 million.
Last week, the SEC also meted out a $6.5-million judgment against New York RIA Senvest Management for “widespread and longstanding failures” relating to electronic communications.
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