An investment advisor previously associated with LPL has agreed to be sanctioned by Finra over his use of an unapproved messaging platform to conduct business communications.
In a letter of acceptance, waiver and consent dated September 6, Finra said John Shen, a general securities representative based in Massachusetts, violated recordkeeping rules by using WeChat to communicate with clients.
WeChat is a Chinese social media application where users can make internet phone calls, share videos, post messages, and engage in video conferences. The app also supports group chats that can include hundreds of users, Finra noted.
The AWC described how from December 2018 to August 2021, Shen used WeChat to discuss investment seminars, engage in Q&A sessions, and provide information about structured notes sold through LPL Financial. These communications were not retained as required under Finra’s Rule 4511, which mandates firms to maintain copies of all communications related to their business.
"WeChat was not an approved platform for written communication at LPL or a permitted social media platform," Finra said.
In 2019 and 2021, Shen inaccurately attested in compliance questionnaires that all his electronic communications with prospective clients were through his email address with LPL.
In November 2019, Finra said LPL warned Shen specifically agaisnt using unapproved messaging platforms in his communications with customers. However, he reportedly continued to use WeChat for business purposes without revealing these activities to LPL. As a result, LPL failed to maintain the required records, leading to a violation of both Finra’s recordkeeping and standards of commercial honor rules.
Shen was discharged from LPL in October 2021, according to his BrokerCheck profile.
Without admitting or denying Finra's findings, Shen agreed to a 30-day suspension from associating with any Finra member and a $5,000 fine.
The issue of recordkeeping and off-channel communications has been a major compliance concern for RIAs, broker-dealers, and wirehouses alike as regulators increase their scrutiny over such texting violations.
In April, Finra fined a Florida broker-dealer $500,000 after it found multiple lapses over the past decade, including failures to preserve business-related text messages.
More recently, the SEC fined more than two dozen firms a collective $393 million in penalties for failing to maintain and preserve records of electronic communications.
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