Bloomberg News

Finra Sanctioned by SEC for Altering Records Before Inspection

November 01, 2011

Oct. 27 (Bloomberg) -- The U.S. Securities and Exchange Commission ordered the Financial Industry Regulatory Authority to improve its internal procedures after accusing a Finra employee of altering records before an SEC inspection.

The director of Finra’s Kansas City office caused the alteration of three records of staff meeting minutes in 2008 hours before producing them to SEC inspectors, making the documents inaccurate and incomplete, the SEC said today in a statement. Finra, the industry-funded brokerage regulator, was ordered to hire a consultant and undertake steps to improve policies, procedures and training for inspections, the SEC said.

“The law requires Finra to produce the documents the SEC seeks in its examinations in complete and accurate form,” Gerald Hodgkins, associate director of the SEC’s Enforcement Division, said in the statement. “Although Finra has previously taken steps to improve compliance, those enhancements did not go far enough to prevent the document production failure that occurred in its Kansas City District Office. This order will help ensure that Finra effectively addresses the weaknesses.”

Finra consented to the SEC order without admitting or denying wrongdoing, the SEC said. The production of altered documents cited in today’s order was the third instance in eight years, the SEC said.

“‘As a regulator, Finra must always hold itself to the highest standards,’’ Finra Chief Executive Officer Richard Ketchum said in a statement. ‘‘We self-reported the Kansas City matter to the SEC and have fully cooperated with the agency’s review. Following our own internal review we took decisive action, including appointing new leadership in our Kansas City office.’’

The Kansas City office director cited in the SEC order wasn’t identified by either agency.

--Editors: Gregory Mott, Lawrence Roberts

To contact the reporter on this story: Gregory Mott in Washington at gmott1@bloomberg.net

To contact the editor responsible for this story: Lawrence Roberts at lroberts13@bloomberg.net


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