By Robert Noens, Spring 2017 Student Intern
There is a WORM in the financial records! Well, actually, the real problem is that there is a lack of WORMs. You see, “WORM” stands for “write once, read many,” and the phrase applies to how electronic records are created and maintained. Simply put, when a file at a financial firm is created and maintained properly, the file should only be “written on” one time (and only one time); afterward, when someone goes back to read the file, they should be able to read file as many times as need be. When executed properly, the file is said to be in WORM format.
Now, it is not difficult to see how there could be a number of problems when a firm fails to create and maintain their files in WORM format (i.e. people having the ability to alter financial records after they have been created). However, failing to keep files in WORM format appears to be exactly what some firms have done, because on December 21, 2016, FINRA announced that it would fine “12 firms a total of $14.4 Million for Failing to Protect Records from Alteration.” Rounding off the top of the list with the largest fine was (drum roll, please!) Wells Fargo. The same firm that, according to the Wall Street Journal, was recently fined $185 million for illegally “opening as many as two million deposit and credit card accounts without customers’ knowledge.” This time, Wells Fargo was fined $4 million for their record keeping, and one can find the other eleven violators on FINRA’s list here.
The potential implications for this failure are not to be taken lightly. Financial records as the SEC puts it are “the ‘primary means of monitoring compliance with applicable securities laws, including antifraud provisions and financial responsibility standards.” If you would like to know more about whether a firm that you have been dealing with was recently fined you can find out more here on FINRA’s website.