Regulators alleged that IPG (Investment Placement Group) failed to reasonably supervise its employees’ electronic communications.
The strict monitoring of employee communications is very important. Though not alleged here to have occurred yet, the failure of monitoring can lead to fraudulent representation of investments. It can also lead to large scale securities fraud such as Ponzi-like schemes.
Beginning in January 2020, IPG permitted an instant messaging platform to be used by its employees for business purposes. Between January 2020 and November 2022, the regulator FINRA (Financial Industry Regulatory Authority) alleges that IPG failed to “establish, maintain, and enforce a supervisory system […]reasonably designed to achieve compliance with the firm’s obligation to preserve and review business-related communications sent and received through the approved messaging platform.”
In January 2020, the firm engaged a third-party vendor to capture the electronic messages its employees sent
and received for preservation purposes. The employee’s personal device had to be connected to the archiving service for this to occur.
The firm, however, did not take sufficient steps to verify that its employees’ devices were in fact connected to the third party archiving service. Moreover, the firm’s internal procedures did not address the use of the third party electronic messaging platform or describe how supervisors at the firm should verify that employees’ devices were connected.
FINRA fined IPG $100,000 and issued a censure. Within 60 days of the settlement, FINRA ordered senior management, and senior management agreed, to certify that a supervisory system to fix shortcomings is implemented.
IPG’s investment advisory arm previously came under regulatory scrutiny due to mutual fund fees being undisclosed.
We fight to inform investors and monitor when a firm fails to supervise its advisors.
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