Barclays Capital Inc. self-reported to FINRA that it failed to preserve electronic business-related records in non-rewritable, non-erasable format (also referred to as “Write-Once, Read-Many” or “WORM” format). Specifically, Barclays reported that it failed to retain countless attachments to emails sent through Bloomberg L.P., and failed to retain approximately 3.3 million instant messages (“IMs”) communicated through Bloomberg.
Although Barclays performed conformance testing and validation in connection with its records management program, the testing did not focus on the format in which the records were being stored or software malfunction. The firm relied on a software program to save the electronic messages for retrieval, but there was a configuration error with the program that was not detected for three years which failed to associate attachments with subsequently processed emails that included the same attachment, and rather saved the attachments as parsed text, which was not WORM compliant. Barclays estimated it generated 500,000 emails on a daily basis. Since the software program was functioning according to its default settings (which were improperly configured), no alerts were generated indicating that the program had malfunctioned. IMs were not saved into their database due to a similar software program malfunction.
As related to these issues, Barclays failed to establish and maintain an adequate Written Supervisory Procedures compliance document along with an adequate system to avoid such failures. Further, the firm did not have an individual or group at the Firm that was responsible for preparing Written Supervisory Procedures aimed at WORM compliance, and did not have auditing specifically designed to verify WORM compliance. Written Supervisory Procedures must be reasonably designed to achieve compliance with applicable securities laws and regulations.
Due to these failures and violations stated above of Exchange Act Rule 17a-4, NASD Rules 3110 and 2110 and FINRA Rules 4511 and 2010, in December 2013 Barclays agreed to pay the $3.75 million dollar fine, and Censure.
Further information on this settlement of the alleged rule violations is accessible by clicking here.