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Brokerage Firms Are They Using Better Technology or Cutting Corners?

Are brokerage firms using technology to better protect the investor client or to just as a cost-cutting strategy to increase the profitability of the firm?

At Vernon Litigation Group, we are concerned that some investment firms are using technology to reduce internal expenses rather than enhance investor protection. According to a recent internet article, FINRA regulators fined Raymond James Financial Services, Inc., $2 million for relying on an inadequate technology-based email surveillance system.  Similarly, JP Morgan Securities LLC was fined $2.8 million by FINRA regulators due to design flaws and coding and data errors in its computer systems.  FINRA does provide guidelines for assessing the effectiveness of computer-based compliance systems. We believe this requires that the computer systems search for keywords in emails from and to advisors in a way that is meaningful, comprehensive, regularly reviewed and audited, and customized, which we interpret to mean that the system needs to be effective in actually protecting the investor.  We believe regulators, investors rights attorneys, and customers should be wary of and condemn the use of technology by investment firms as a replacement for, rather than a supplement to, proper compliance and supervision over the firm’s sales force.

Vernon Litigation Group is a team of financial litigators that represent clients in courtroom litigation, arbitration, and mediation throughout the United States. Our lawyers have collectively represented thousands of investors in FINRA and other securities arbitration and litigation claims nationwide and recovered millions of dollars from financial institutions, both large and small. For more information, visit our website at vernonlitigation.com or contact Vernon Litigation Group by phone at (239) 319-4434 or by e-mail at info@vernonlitigation.com.

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