Stephens Inc. fined by FINRA

The Financial Industry Regulatory Authority (FINRA) recently announced that it has censured Stephens Inc., of Little Rock, Arkansas, and fined the firm $900,000 for allegedly inadequately supervising firm-wide internal “flash” emails sent by its research analysts to convey information about companies and industries the firm covered. These failures created the risk that the flash emails could potentially include material nonpublic information that might be misused by sales and trading personnel. As part of the resolution of the FINRA censure, Stephens will also cease distributing flash emails and was ordered to implement a plan to conduct a comprehensive review of its policies, procedures and training in the research area.

Stephens’ firm-wide flash email program was reportedly designed as an expeditious way for research analysts to share publicly available news and insights regarding covered companies with its sales and trading personnel for discussion with firm customers interested in those companies. However, FINRA apparently found that from at least August 2013 through January 2016, Stephens did not adequately supervise the content and dissemination of the flash emails, and that the firm failed to establish, maintain, and enforce adequate written supervisory procedures concerning trading in connection with these flash emails. In addition, FINRA found instances of firm personnel forwarding flash emails marked “internal use only” to customers, or cutting and pasting the text of an internal-use email into a separate communication sent to a customer. In at least one instance, FINRA also found that content from an unapproved, draft research report was cut and pasted into a flash email. Although these practices were contrary to firm policy, FINRA found that the firm lacked effective monitoring or supervisory systems to detect or prevent them.

In settling this matter, Stephens neither admitted nor denied the charges, but consented to entry of FINRA’s findings.

The foregoing information, which is all publicly available on FINRA’s website, is being provided by The White Law Group.  The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Franklin, Tennessee.  The firm represents investors throughout the country in FINRA arbitration claim against their brokerage firm.

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