Finra Compliant Cloud Storage
What is Finra?
Finra, or the Financial Industry Regulatory Authority, is a not-for-profit organization authorized by Congress to protect America’s investors by making sure the securities industry operates fairly and honestly. Finra oversees about 4,250 brokerage firms, 154,000 branch offices and 630,000 registered securities representatives. As the leading private-sector regulator of America’s securities industry, Finra creates and enforces rules that promote high standards of commercial honor and just and equitable principles of trade.
Finra Data Retention Requirements
Finra has specific rules regarding data retention for the securities industry. Member firms are required to retain records related to their brokerage business based on the type of record. This includes communications like emails, text messages, chats and social media messages. Electronic records need to be easily accessible for the required retention period.
Here are some key Finra data retention requirements:
– Communications related to a member firm’s business must be kept for 3 years. This includes emails, chats, social media messages, etc.
– Records related to customer accounts and securities transactions must be kept for 6 years.
– Information related to corporate financing and disclosures must be kept for 3 years.
– Information on securities transactions must be accessible for 2 years.
Choosing Finra Compliant Cloud Storage
Many firms are moving storage to the cloud for convenience, security and cost savings. However, it’s important to choose a cloud storage provider that enables compliance with Finra regulations. Here are some tips when evaluating Finra compliant cloud storage:
– Make sure the provider can limit access and permissions based on user roles. You need to control who can view, edit, delete and print files.
– Check that you can easily audit user activity like logins, file access and changes.
– Confirm the provider offers robust authentication methods like multi-factor authentication to prevent unauthorized access.
– Verify the solution provides immutable storage where records cannot be deleted or modified during the retention period.
– Validate the provider has backups, failover measures and disaster recovery capabilities. Records must be accessible at all times.
– Review security practices like encryption of data in transit and at rest. Make sure proper controls are in place to detect threats.
– Assess chain of custody on records, tracking who accessed them and when.
– Confirm the provider can format data for efficient delivery if requested by Finra for an investigation.
Following Finra regulations is critical for firms to avoid steep fines and penalties. Partnering with the right cloud storage provider can help you stay compliant while leveraging the benefits of the cloud.
Finra plays an important role in governing securities firms to protect investors and ensure market integrity. Adhering to its record keeping and retention rules is a crucial part of a firm’s compliance program. Cloud storage can provide convenient, secure retention when properly implemented with Finra regulations in mind. Evaluating providers based on access controls, auditing, security features and chain of custody will help firms reap the advantages of the cloud while avoiding regulatory missteps.
The Risks of Non-Compliance
Failing to adhere to Finra’s record retention regulations can have serious consequences including large fines, suspension of operations or even the termination of Finra membership. Some recent examples of penalties include:
– In 2020, Finra fined broker-dealer TD Ameritrade $1.5 million for failing to maintain electronic communications records for review.
– Also in 2020, Wells Fargo was fined $7 million by Finra for improper record storage procedures affecting millions of accounts.
– Finra fined UBS Financial Services $5.5 million in 2019 for not storing business-related messages sent over unauthorized messaging channels.
The risks of non-compliance go beyond fines. It can significantly impair a firm’s operations if records are found inaccessible when needed for internal reviews or client inquiries. Mishandling of records can also lead to lack of trust and reputation damage with regulators and clients.
Best Practices for Compliance
Here are some best practices firms can follow to remain compliant with Finra regulations:
– Provide ongoing training to employees on proper electronic communications procedures per company policies and Finra rules. Stress the importance of retaining business records.
– Implement controls and surveillance procedures to prevent the use of unauthorized communications methods for business matters. Monitor regulatory developments that may affect policies.
– Utilize electronic communications archiving tools to automatically capture, index and store communications data for the required time periods.
– Develop standardized processes for timely destruction of records after retention periods expire.
– Perform scheduled audits and spot checks to validate data retention procedures are being properly followed across the organization.
– Maintain detailed records of access and changes to stored data to ensure chain of custody requirements are met.
– Create redundancy for storage systems and backup data to allow for availability and recovery in case of technology failures or outages.
– Work closely with qualified legal counsel to continuously evaluate compliance with updated Finra rules.
Faithfully meeting Finra record retention requirements demonstrates a commitment to ethics and responsibility. Following best practices helps firms:
– Uphold investor confidence by showing accountability in maintaining records that protect customer interests.
– Build goodwill with regulators by illustrating transparency and compliance to rules that govern the industry.
– Boost reputation with the public through dedication to fairness and integrity in handling records.
– Enhance credibility with clients by handling their information with respect according to regulations.
– Motivate employees to do the right thing by providing training on the importance of retention compliance.
Firms that consistently show they value operational excellence and trustworthiness have an advantage in attracting clients and talent. While regulations like Finra’s create added responsibilities, they ultimately work to elevate firms investing in compliance.
Navigating Finra’s extensive data retention rules takes commitment, diligence and expert knowledge. Following best practices and leveraging technology like compliant cloud storage helps firms manage obligations efficiently while avoiding significant penalties. Beyond just avoiding fines, embracing consistent compliance promotes stakeholder confidence and a reputation for high ethics and integrity.