SEC imposes monetary penalty on Loop Capital Markets over failure to preserve emails

Maria Nikolova

Loop Capital Markets has to pay a penalty for failing to preserve emails transmitted by a senior registered representative via her personal email address.

How secure is your brokerage against cyber attacks?

The lack of a strict difference between use of personal and corporate email raises a bunch of social issues, but for Chicago-based broker-dealer Loop Capital Markets the blurring of the lines between personal and business communication has resulted in an administrative action by the United States Securities and Exchange Commission (SEC).

On October 19, 2017, the Commission issued an Order instituting cease-and-desist proceedings against the company.

The proceedings stem from the failure of Loop Capital to preserve certain communications relating to its business, in violation of Section 17(a) of the Commodity Exchange Act and Rule 17a-4. These rules require that brokers or dealers make and keep current various records relating to its business and preserve those records for specified periods of time. Rule 17a-4(b)(4), in particular, requires broker-dealers to preserve for three years originals of all communications received and copies of all communications sent relating to their business.

The Commission finds that Loop Capital failed to preserve emails transmitted by a senior registered representative. During 2011 and 2012, the registered representative used her personal email address to send communications relating to Loop Capital’s business with other employees and with third parties. The personal email was used to conduct business of Loop Capital involving a finance transaction.

Although the registered representative had access to a email account, she deliberately used her personal account to transmit emails in order to avoid review and surveillance by Loop Capital. The Registered Representative also did not provide copies of the emails to Loop Capital so that the company could preserve such communications.

In October 2013, SEC staff requested information from Loop Capital, including electronic communications relating to the aforementioned finance transaction. Because the registered representative did not provide certain communications that were sent using her personal email account to Loop Capital, the company was unable to produce those communications to the Commission.

In anticipation of the institution of the proceedings, Loop Capital has submitted an Offer of Settlement which the SEC has accepted.

In line with the terms of the offer, Loop Capital agrees to cease and desist from committing or causing any violations and any future violations of Section 17(a) of the Exchange Act and Rule 17a-4(b)(4). In addition, the company has to pay a civil money penalty in the amount of $25,000 to the Securities and Exchange Commission.

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