The ongoing regulatory crackdown on instances of off-channel communications has continued to “get personal,” with the Financial Industry Regulatory Authority (FINRA) issuing a $10,000 fine and one-year suspension to a former Wells Fargo Advisors broker for not only sending messages relating to business on his personal phone – but for deleting messages to try and cover it up.
Off the books
The letter of acceptance FINRA issued to summarize the case alleged that, between September 2023 and January 2024, Eyan M. Townsend sent text messages that “contained customer information, values for annuities held by a customer, and requests to transfer funds from customer accounts” to a Wells Fargo colleague.
Wells Fargo explicitly prohibited the use of text messages for business-related communications. By not disclosing his use of text messages to discuss business and failing to provide copies of these messages to Wells Fargo, Townsend caused the firm to breach FINRA rules on preserving books and records, notably FINRA Rule 4511. Regulators have taken a dim view of firms being unable to provide complete records of communications data in the past, as it prevents regulatory bodies from being able to assess those records for potential signs of misconduct, leads to firms looking like they are unintentionally trying to cover something up, and breaches myriad recordkeeping rules.
Deny, delete, disinform
Townsend, on the other hand, appears to have attempted a very intentional cover-up. Wells Fargo investigated Townsend’s unauthorized use of text messages for business communications between January and April 2024. FINRA’s investigation found that, “in order to impede the firm’s investigation,” Townsend not only deleted the text messages from his personal device, but he also asked the recipient of those messages to delete them and falsely stated to his employer that he did not send any business-related messages.
FINRA’s investigation summarized that:
“Failure to respond truthfully and accurately to their firm’s requests for information [and] providing false statements to a FINRA-member firm and deleting text messages in order to impede a member firm’s internal investigation is a violation of FINRA Rule 2010.”
What are FINRA Rule 4511 and FINRA Rule 2010?
- FINRA Rule 4511:This rule establishes that firms must maintain records of all business communications, sent or received internally or externally, and that these records are legible, true, accurate, and complete. FINRA member firms must preserve these records for three years, and must ensure “originals of all communications received, and copies of all communications sent by the member, broker, or dealer” are retained for the duration.
- FINRA Rule 2010: This rule requires that employees of member firms “observe high standards of commercial honor and just and equitable principles of trade.” This includes the expectation that those working for firms uphold respectable and ethical business practices, demonstrate integrity, and do not engage in behaviors that would undermine investor confidence in financial markets.
Ongoing consequences
Wells Fargo terminated Townsend’s employment in May 2024 for “failing to conduct business through firm-approved communications technology,” with his behavior having circumvented communications compliance policies and rules of conduct.
But the consequences did not end there. Townsend went on to register with another securities brokerage in July 2024 – however, by December of that year he was “permitted to resign” as:
“The firm became aware that [Townsend] provided misinformation to his former firm during their internal investigation.”
Townsend has not only lost two positions over the misconduct, but has been fined and suspended by FINRA, although the terms of the regulator’s acceptant letter make it clear he accepts their findings without admitting or denying them.
There are several clear takeaways here:
- Breaching policies and procedures around off-channel communications will be taken incredibly seriously by firms, as they are attempting to protect themselves from regulatory censure or fines from being made to breach recordkeeping rules.
- As has been identified before, communications compliance issues are often warning signs of other potential misconduct at play, as those engaging in off-channel communications are likely to be engaged in other types of misconduct.
- Misconduct issues can’t just be left behind when changing jobs – and if an employer discovers that you were responsible for misconduct or regulatory rules breaches in a prior position, it may well affect your chances at future employment.
- While over 40% of firms still ban channels as part of their communications compliance strategy, as Wells Fargo did with text messages, bad actors will still use these channels to fly under the radar – so relying on bans is not a watertight communications compliance solution.
FINRA gets personal
While the pace of regulatory enforcement actions around off-channel communications targeted at firms have slowed considerably over the last year, the topic is firmly on FINRA’s radar. The regulator issued a $500,000 fine to a firm for recordkeeping rules breaches in July 2025. In a case not dissimilar to Townsend’s, FINRA fined and suspended a former Charles Schwab representative for concealing an unauthorized profit-sharing agreement in “thousands” of off-channel text messages. In August this year, FINRA also fined a broker for cheating on continuing education requirements, breaching FINRA Rule 2010.
Although firms might be breathing a sigh of relief after years of concentrated off-channel communications enforcements and fines, with over 100 firms hit with a combined $3 billion in fines since 2021, FINRA’s increasing focus on holding individuals to account should be seen as a clear warning to the industry: personal devices can bring personal liability.
Banning channels might feel like a solution to communications compliance challenges, but it’s been proven time and again that channel bans don’t work – and that capturing all your business communications channels is the only way to ensure complete communications compliance.
